Bangladesh Krishi Bank (BKB) is struggling to meet its ambitious lending targets for the Cottage, Micro, Small and Medium Enterprise (CMSME) sector and, consequently, is failing to qualify for incentive financing from the Bangladesh Bank.
According to a BKB report, the bank has a target of distributing Tk12,500 crore in the CMSME sector for the current fiscal year. However, as of 27 November, the bank distributed only Tk2,363 crore, representing just 18.91% of the target.
In recognition of the CMSME sector’s importance to national economic development, the Bangladesh Bank issued a circular on 17 March stating that by the end of 2025, CMSME loans must account for 25% of a bank’s total outstanding credit.
The BKB was also unable to meet that benchmark. The bank’s report shows that as of the end of November, its total outstanding loan balance was Tk35,337 crore, of which CMSME loans accounted for Tk6,641 crore, or 19% of the total.
Reasons for underperformance
A senior BKB official, speaking to TBS on condition of anonymity, cited several reasons for the lending deficit. “Demand for loans in the CMSME sector is low because the demand for goods and services produced in this sector has decreased, compounded by reduced market demand due to high inflation,” he said.
The official added that following the current government taking charge, new loan disbursements face increased scrutiny, which is slowing the process. “It takes two to three weeks longer than before to complete a loan disbursement. This is also a reason for not meeting the target.”
Missing out on refinance scheme
To encourage banks to increase their lending in the CMSME sector, the Bangladesh Bank has maintained a Tk25,000 crore pre-financing scheme. The central bank announced the continuation of this scheme on 12 November; it was originally announced in 2022 and had expired in July.
Under this special scheme, which is funded by the Bangladesh Bank’s own resources, banks and financial institutions receive funds at a 2% interest rate, while the maximum interest rate for end-borrowers is capped at 7%.
It is understood that BKB’s failure to meet its lending target is creating problems for the bank in accessing funds from this highly beneficial scheme.
BKB Managing Director Sanchia Binte Ali expressed dissatisfaction over the failure to meet the target at a meeting held in the first week of this month and urged officials at all levels to strive for its achievement.
