Gulam Rabbani Chowdhury: High borrowing costs and limited access to bank credit are holding back industrial competitiveness. Strategic reforms can empower industries, boost exports, and make the economy more sustainable.

Over the past three decades, Bangladesh has made remarkable strides in economic development. From a primarily agrarian economy, the country has transformed into a significant manufacturing and export hub, particularly in ready-made garments (RMG). Today, Bangladesh is among the world’s largest garment exporters and has developed promising industries in pharmaceuticals, ceramics, leather goods, shipbuilding, and agro-processing.

Yet, despite these achievements, a persistent challenge continues to limit Bangladesh’s global competitiveness: the high cost and limited accessibility of bank finance.

For most businesses, commercial bank loans remain the primary source of investment and working capital. Unlike competing economies such as Vietnam, China, and India, where firms have access to lower-cost loans, venture capital, and diversified financing options, Bangladeshi companies often face expensive credit and lengthy approval processes. This raises production costs, slows industrial expansion, and limits the ability to invest in technology and efficiency improvements.

Small and medium-sized enterprises (SMEs), which form the backbone of Bangladesh’s industrial growth, are particularly affected. Strict collateral requirements, extensive documentation, and bureaucratic delays prevent many capable SMEs from accessing timely financing. Meanwhile, a high level of non-performing loans (NPLs) in the banking system makes banks risk-averse, further constraining credit availability.

The consequences are clear: limited and costly access to finance prevents industries from modernizing, expanding, and moving up the global value chain. Without strategic reforms, Bangladesh risks losing its hard-won competitiveness in global markets.

Policy Recommendations for Change
1. Lower and Stabilize Lending Rates: Policymakers and the central bank should work to ensure competitive lending rates, particularly for export-oriented and high-growth industries. Targeted financing schemes can reduce borrowing costs and stimulate investment.
2. Strengthen Development Finance Institutions: Expanding long-term funding options for industrial projects and infrastructure development will enable strategic investments that banks may otherwise hesitate to support.
3. Improve SME Access to Finance: Simplified loan procedures, digital banking platforms, and government-backed credit guarantees can enhance financial inclusion for smaller enterprises.
4. Diversify Financing Sources: Encouraging corporate bonds, venture capital, and private equity can reduce reliance on commercial bank loans and create a more resilient industrial ecosystem.
5. Enhance Banking Governance: Reducing non-performing loans and improving oversight will restore confidence in the banking sector and increase its capacity to support productive investments.

Bangladesh has demonstrated tremendous entrepreneurial energy and industrial potential. The country’s industries have proven capable of competing globally when given the right financial support. Affordable, accessible, and strategically directed bank finance is not just a banking concern, it is a national economic priority. Implementing these reforms will empower industries, sustain industrial growth, boost exports, and make Bangladesh’s economy stronger and more sustainable for the decades ahead.

Author: Gulam Rabbani Chowdhury, Industrial Policy Expert