- In 2020, defaulted loans in the sector was around Tk600 crore
- Tk35,000 crore defaulted by traders of all sectors in 8 years
- Of the amount, the consumer goods sector defaulted Tk14,000 crore
- Among big groups, SA Group owes Tk4,000 crore to 18 banks
- Loan-giving banks filed cases with Chattogram Artha Rin Adalat in 2020 to get back around Tk2,421 crore
Around 41% of business loan defaulters in the port city of Chattogram come from the consumer goods sector.
Different banks and financial institutions in the city have provided loans for various sectors including consumer goods, steel-ship breaking, readymade garment, agriculture and housing. Of the business loans disbursed so far, around Tk35,000 crore has been defaulted by traders in the last eight years.
Sources concerned said that there are a number of reasons behind the rise in defaulted loans in this sector year by year.
Among those, selling goods at less than imported prices during 2007's army-backed caretaker government's reign; fluctuation of product prices in domestic and international markets; still conducting business in a conventional way; inadequate development of corporate culture; and the tendency of traders going into hiding after receiving loans are the main ones.
The amount of defaulted loans is increasing year by year in the consumer goods sector. There are allegations against businessmen of this sector of investing the loan money in another sector after getting it for the consumer goods sector. There are also allegations that traders of this sector indulge in luxurious lifestyles with bank loans.
Shahadat Hossain, senior vice-president and Chawkbazar branch manager of Islami Bank, was the branch manager, for a long time, of National Bank's branch in Khatunganj, the biggest wholesale market of consumer goods in the country.
The official said once wholesalers of Khatunganj used to trade hundreds of crores of taka based on trust. On trust, the banks also used to provide loan facilities in various categories including easy import. But over the past few years, transactions based on trust have suffered a severe blow as many traders went into hiding without repaying bank loans or creditors. Some traders are truly doing business with the loan, but instead of repaying loan installments from the profit, they indulge in buying lands or investing the profit in other ventures or enjoying luxury to the fullest.
According to the data of Chattogram Artha Rin Adalat, out of the Chattogram's total Tk35,073 crore defaulted loans in the last eight years (2013-2020), the amount of defaulted loans in the consumer goods sector is Tk 14,000 crore.
Increasing the amount of defaulted loans year after year, many traders have fled the market in the last seven to eight years. Some traders are in business, but are not repaying loan installments year after year. The banks that provided the loans are worried about recovery of the loans.
The M/S Elias Brothers of MEB Group tops the list of loan defaulters among the importer of consumer goods. Starting its business in 1946 in Dhaka, this eminent industrial group of Chattogram now has a debt burden of thousands of crores of taka from 15 banks. Almost all of its loans are now defaulted. MEB Group was also at the top of the list of defaulters published in Parliament in 2016 and 2017.
This traditional Chattogram business conglomerate first came into business through consumer goods. The group then led the country's consumer goods business before and after independence. It was the chief distributor of multinational consumer goods producer Unilever in this country for about three decades. Later, Elias Brothers closed down its business with Unilever and developed various industries. The group started producing several consumer goods including soybean oil, drinking water, IC Cola, glass and knitting.
But, due to uncontrolled investment in the consumer goods business and family feuds, the country's leading consumer goods importer gradually fell behind in competition. Once, it had more than a dozen companies, but now all are closed.
Mostafa Group and a handful of other companies were doing exclusive business in the consumer goods sector all over the country including the port city.
But with the change of time, the group's financial condition deteriorated. At present, the group that once was at the forefront in the consumer goods sector is no more in the business for the past few years. The group has shut down its edible oil, shipbreaking, agriculture (tea garden, rubber orchard, mango orchard), paper, fish (shrimp), steel, transport, shipping, securities and RMG businesses one by one.
Mostafa Group, which has been in business for nearly 70 years, now owes more than Tk2,000 crore to more than 30 financial institutions including banks. These banks and financial institutions have filed hundreds of cases against the leaders of the group for failing to repay the loans. Of these, arrest warrants have been issued against the leaders of the company in 36 cases.
Chattogram-based Nurjahan Group once was a giant in the consumer goods business. It dominated the market of edible oil, wheat and spices for years; but the previous situation is no more. The group's business has shrunk over the past few years; it now has over Tk2,500 crore loans in five banks.
In terms of loan defaulters, steel shipbreaking sector is second to consumer goods in Chattogram.
In the last eight years, the total amount of defaulted loans in this sector is Tk9,824 crore. The agro-based economy is in the third position with Tk1,591 crore. The ready-made garment sector is in the fourth position in the list of defaulters. The default amount in this sector is Tk1,046 crore.
The housing sector is in the 5th position with a defaulted loan of Tk901 crore. From 2013 to 2020, 4,757 finance loan cases have been filed with the Chattogram Finance Credit Court. The rate of case settlement is very low as compared to the number of cases filed. A joint district judge is currently serving in the finance court.
Zia Habib Ahsan, a lawyer handling money loan cases of various banks, said that since 2013, an average of 600 cases every year have been filed with Artha Rin Adalat. But the case settlement rate is less than 10%.
As a commercial city, banking investment is high in Chattogram. Again, the amount of defaulted loans is too much. At least two money lending courts are needed in Chattogram to recover the deposits of the common people kept in the bank, i.e. to settle the cases filed by the banks.
In the last one year (2020), around Tk600 crore has been defaulted from the money invested by various banks in the consumer goods sector. The loan-giving banks have already filed cases against 15 companies in the consumer goods sector in Chattogram. In the previous seven years (2013-19), the default amount to more than 200 companies, including 26 large industrial groups in the sector, was about Tk13,800 crore. As such, by December 2020, the total defaulted loan amount of banks and financial institutions in the consumer goods sector was Tk14,396 crore.
Among the defaulters, AB Bank Khatunganj branch has Tk108 crore due from Elias Brothers; Agrani Bank Asadganj branch has Tk 191 crore from Zainab Trading; Bangladesh Commerce Bank Chaktai branch has Tk57 crore from from MN Akter Enterprise and more and more.
Among the big industrial groups that have defaulted in the consumer goods sector so far, SA Group owes Tk4,000 crore to 18 banks, MEB owes Tk1,000 crore to 15 banks, Mustafa Group owes Tk2,000 crore to 30 banks, Messrs Siddique Traders owes Tk1,000 crore to 15 banks, Imam Group 800 crore from various banks, Tk2000 crore from Nurjahan Group etc.
Zahir Uddin Ratan, the head of Nurjahan Group, said that there has been a big loss in 2012-2013 due to the sharp fall in the prices of domestic and international products. "I have repaid the money of the bank even after losing hundreds of crores of taka. But the amount of loan is increasing year by year due to not being able to repay the loan 100%. On the other hand, the banks are not refinancing as they have become defaulters. As a result, it is not possible to repay the loan."
The trader further said that with the exception of a few companies, all the big industrial groups in the consumer goods sector have gone bankrupt incurring huge losses. The trader feels that the old traders need to be brought back to the business and refinanced to pay the bank dues.
Mahbubul Alam, president of the Chattogram Chamber of Commerce and Industry, said consumer goods business is the second most risky sector after the stock market. Because sometimes there is a possibility of becoming a millionaire overnight if there is insufficient supply according to demand in the market. Similarly, there are instances of bankruptcy by importing goods several times more than the demand, and selling the goods at half of the imported price.
So, business and investment in this sector requires caution from both traders and banks, he observed.
Consumer goods traders said that the business of consumer goods is very easy. New entrepreneurs start business in the market with a small amount of investment. Then the banks and financial institutions without proper checking invest in the ventures.
The loan receivers spend the money on other businesses as well as in purchasing land, constructing houses and enjoying other luxuries. Then one day, suddenly, the bank loan got stuck in businesses. Thus, the number of defaulting loans is increasing year by year in Khatunganj, the country's traditional consumer goods market.
According to the court records, in the last eight years (2013-2020), about Tk36,000 crore has been defaulted by banks and financial institutions to traders in Chattogram.
Among them, the loan-giving banks and financial institutions have filed a case in the Chattogram Finance and Credit Court in 2020 to get back around Tk2,421 crore.