Loan disbursements to the Cottage, Micro, Small, and Medium Enterprise (CMSME) sector dropped by 16 per cent in the July-September quarter of FY25 compared to the same period in FY24, due to political turmoil and economic instability during the period.
According to Bangladesh Bank data, CMSME loan disbursements fell to Tk 44,202 crore in July-September 2025 from Tk 52,654 crore in the corresponding period.
Bankers attributed this sharp decline to political uncertainty, which disrupted business confidence and investment activities.
The Anti-Discrimination Students Movement escalated protests for government job quota reforms from July 1, leading to unrest that culminated in Sheikh Hasina鈥檚 resignation on August 5.
The upheaval forced many businesses linked to the Awami League-led government to close or downscale operations, further dampening credit demand in the CMSME sector.
Beyond political factors, the volatility in the dollar exchange rate also played a key role in slowing loan disbursements.
The exchange rate surged to Tk 123 per dollar in December 2024, up from Tk 110 in December 2023 and Tk 99 in December 2022.
This sharp depreciation of the local currency increased the cost of imported goods and raw materials, making production more expensive for businesses reliant on imports.
Many enterprises sought additional financing to manage rising costs, while those with dollar-denominated loans faced higher repayment burdens, constraining their ability to take on new credit.
The banking sector鈥檚 persistent liquidity crisis, coupled with soaring non-performing loans, also limited loan availability.
High inflation and a weakened economic outlook further tightened credit conditions.
Lending rates surged to nearly 15 per cent by September 2024, up from 12 per cent in March and 10 per cent in December 2023, making borrowing costlier for businesses.
Private sector credit growth slumped to 7.2 per cent in December 2024, the slowest pace in years, highlighting the broader economic slowdown.
Despite the downturn in new loan disbursements, CMSME loan recovery saw a modest increase.
Total loan recovery in the July-September period of FY25 stood at Tk 52,361 crore, up from Tk 51,019 crore in the same period a year earlier.
The total outstanding CMSME loan portfolio edged up to Tk聽2,99,958 crore from Tk聽2,98,339 crore in the previous year.
Among banks, private commercial banks accounted for the largest share of outstanding CMSME loans at 74.6 per cent, followed by state-run banks at 18 per cent, specialised banks at 2.15 per cent, and foreign banks at 1.22 per cent.