Due to a rebound in demand following the reopening of the economy in the second half of last year, loan disbursement by non-bank financial institutions (NBFIs) increased 46% year over year in the April–June quarter.
According to data released on Sunday by the Bangladesh Bank, financial institutions distributed Tk 6,839 crore between July and April of 2022, an increase from Tk 4,680 crore during the same period in the previous year. Following transportation, trade, commerce, and construction, agriculture and fishing experienced the biggest year-over-year growth in this loan disbursement.
The industrial sector holds 37% of all loans disbursed during the quarter and has seen 21% growth compared to the same quarter last year. According to officials from two leading NBFIs, the sector is recovering from decline caused by covid 19 resurgence in April-June, 2021. That’s why the loan disbursement in this sector is high.
According to Mominul Islam, managing director and CEO of IPDC Finance Ltd., “The transport sector was one of the worst hit and disbursements for this sector were low last year.” He also claimed that, since October to December of last year, disbursements had started to improve and had continued to rise into the subsequent quarter. He further added, “Last year, there was good liquidity available on the market. Bangladesh Bank’s refinance system was very helpful as it played a significant role in recovery.”
However, due to the impact of the Russia-Ukraine war on the local economy, overall loan disbursement decreased somewhat from the prior January-March quarter to the April-June quarter. That is why it’s expected that the growth may also be weak in this quarter too.
The NBFIs have seen year-over-year and quarter-over-quarter declines in overall deposits excluding inter-NBFIs in the April-June period. Three months up to June 2022, total deposits at NBFIs were calculated BDT 42,086 crore, a decrease of 0.44 percent from BDT 42,272 crore the previous quarter. However, deposits at financial institutions totaled BDT 42,603 crore between April- June,2021 said Bangladesh Bank source.
According to Mesbah Uddin Ahmed, general Manager of IDLC Finance Ltd, the interest rates on lending and deposit have been enforced since April 2020, which has affected deposit growth of this financial sector. However, bank deposits are not subject to a cap on interest rates. He also mentioned that, “The third wave of coronavirus pandemic that occurred between April and June, had a significant impact on loan disbursements. Each quarter, the NBFIs as a whole typically disburse roughly Tk 8,000 crore”.
During the lockdown, all sorts of construction work were shut. As there was a drop in last year’s disbursement, this year it is facing a high growth rate. Currently Bangladesh has 34 NBFIs operating through 281 branches and most of them are operated from urban areas. As per a central bank data from June 2022, total deposit of these NBFIs stood at BDT 42,086 crore while these have BDT 69,080 crore as advance.