Microcredit firms see growth hit 5-yr low

HM Murtuza | Published at 12:00am on October 19, 2019

The private sector credit growth through microcredit organisations dropped to a five-year low in last fiscal year of 2018-2019 amid an unpleasant investment situation in the country.

In FY19, the private sector credit growth decreased to 11.4 per cent, the lowest since FY 2013-14 when the growth rate was 8.8 per cent, according to a Bangladesh Bank report released last week.

The BB data showed that outstanding credit disbursement by the microcredit entities to the private sector increased to Tk 63,600 crore at the end of June, 2019 from Tk 57,000 crore at the end of June, 2018.

Credit disbursement by the entities to the private sector grew by 23.1 per cent in FY18, 24.5 per cent in FY17, 27.2 per cent in FY16 and 25.6 per cent in FY15.

Apart from the microcredit entities, a slowdown in the private sector credit growth was also observed in banks and non-bank financial institutions.

As per the latest BB data, the growth in the private sector credit disbursement by the banks dropped to 10.68 per cent in August this year, the lowest after September, 2010 when it was 6.09 per cent.

In the case of the NBFIs, credit disbursement to the private sector plunged to an all-time low at 4.1 per cent in last fiscal year.

According to the BB data, the NBFIs had been maintaining double digit growth since 2002 except FY17 and FY19.

In FY16, the growth in the NBFIs’ credit disbursement to the private sector was 21.3 per cent that dropped in the FY17 to 9.9 per cent.

Since the microcredit organisations are mostly dependent on banks’ fund, they have been suffering from liquidity crisis due to the ongoing fund crisis in the banks, said experts.

A rise in living costs also reduced people’s savings capacity and that’s why the microcredit farms were unable to receive accumulated savings which they issue as credit, they said.

Apart from these, no improvement in the investment situation in the country was a major reason for the private sector credit growth fall, experts said.

They also suggested that the government should focus on improving investment situation so that the investors feel encouraged to resume investments.

The BB data also showed that microfinance entity BRAC disbursed the highest — Tk 39,610 crore — in loans to the private sector in the fiscal year of 2018-2019 against its recovery of Tk 39,890 crore in the fiscal year.

ASA, another microfinance organisation, disbursed the second highest — Tk 32,470 crore — in FY19 against its recovery of Tk 31,640 crore in the fiscal year.

In FY19, Grameen Bank disbursed the third highest — Tk 25,140 crore — in loans to its customers against the recovery of Tk 24,510 crore in the period.

Proshika, another microcredit entity, disbursed Tk 430 crore against its recovery of Tk 420 crore in FY19.

Overdue loans with the microcredit entities against outstanding amount, however, dropped significantly to 1.8 per cent at the end of FY19 against 5.4 per cent in FY18.