Private sector credit growth fell slightly in March this year when compared to the previous month, due to lower credit demand amid anxieties over the second wave of Covid-19 pandemic.
In March, private sector credit growth stood at 8.79%, down from 8.93% in February, according to data from the Bangladesh Bank.
After plummeting to 8% in October last year, private sector credit growth rose to about 9% in February this year.
Entrepreneurs focused on increasing production in the wake of rising demands, thanks to the end of the first wave of Covid-19 was over and the beginning of the vaccination programme. Under the influence of this, the credit growth began to increase.
But the second wave of Covid-19 since March has once again created an uncertain environment, which has also had an impact on the private sector credit growth.
Abul Kashem Khan, former president of the Dhaka Chamber of Commerce and Industry and chairman of the Business Initiative Leading Development (BUILD), told The Business Standard last month that the launch of the vaccination had given everyone hope, which had encouraged private sector investment. This has had a positive impact on debt growth in February, he added.
However, entrepreneurs are increasingly worried as the pandemic started to a dangerous turn since mid-March. The effect may be felt in April-June.
Abul Kashem does not see any possibility of new investments amid such an uncertain situation.
There was little change in private sector credit growth over entire of the last financial year. As a result of the disbursement of loans under government-announced incentive packages, the growth in the first three months of the current financial year reached 9.5%. After that, it started to decrease again.
The central bank has reduced its credit growth target from 14.8% to 11.5% for the second half of the current fiscal (January-December) after realizing that the credit growth target set for the current fiscal cannot be met.
Syed Mahbubur Rahman, former chairman of the Association of Bankers Bangladesh (ABB) and managing director of Mutual Trust Bank, told The Business Standard the economic recovery has faced a setback as the situation has worsened around the world. In such a situation, the growth of credit in the private sector will not increase in the coming days, he added.