SME loans dip by 10pc in Q1 as liquidity crisis bites

HM Murtuza | Published at 10:45pm on July 10, 2018

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A file photo shows the Bangladesh Bank headquarters at Motijheel in Dhaka.-- New Age

SME loan disbursement by banks and non-bank financial institutions declined by 10.34 per cent or Tk 4,201 crore in the first three months (January-March) of the year 2018 compared with that in the same period of the previous year.
As per a recently released central bank report, banks and NBFIs disbursed Tk 36,419.55 crore in loans to the SME sector in the first quarter of the year 2018, while the figure was Tk 40,620.54 crore in the same quarter last year.
Bangladesh Bank officials said that banks and NBFIs might have reduced lending fund to the SME sector mainly because of liquidity crisis that surfaced from January this year.
Beside, adjustment of advance-deposit ratio following the imposition of new ratio by the central bank in January this year might be another reason for the reduced lending by the banks to the SME sector, they said.
They, however, said that the figure might increase gradually depending on the liquidity situation at the banks.
The BB on January 30 reduced the advance (loan)-deposit ratio for conventional banks to 83.5 per cent from 85 per cent and IDR (income-deposit ratio) for Islamic banks to 89 per cent from 90 per cent and the entities are supposed to adjust the ratio by March, 2019.
Asked, Association of Bankers, Bangladesh chairman Sayed Mahbubur Rahman told New Age, ‘It could be the overall stressed liquidity situation prevailing in the banking sector that was behind the slowdown in the SME loan disbursement.’
He, however, said that the SME loan disbursement situation might improve gradually depending on the overall liquidity situation at banks.
Although SME loan disbursement to the service and manufacturing sectors increased in January-March, loans to entrepreneurs associated with the trade sector fell sharply by 34.03 per cent or Tk 9,046 crore.
In January-March this year, SME loans to entrepreneurs associated with the trade sector declined to Tk 17,534.21 crore while the figure was Tk 26,580 crore in the same quarter in 2017.
The number of beneficiary entrepreneurs also fell by 23.8 per cent to 1,19,423 in the first quarter of 2018 from 1,56,740 a year ago.
In January-March, entrepreneurs associated with the manufacturing sector received 28.16 per cent, or Tk 2,711 crore, higher loans from banks and NBFIs.
The entities disbursed Tk 12,337 crore to the manufacturing sector in the quarter, whereas the loan disbursement figure was Tk 9,626 crore in January-March last year.
SME loans to the service sector increased by 48.37 per cent, or Tk 2,134 crore, to Tk 6,548.02 crore in January-March of 2018 from Tk 4,413.25 crore in the first quarter of 2017.