Credit bottlenecks, energy costs weigh on manufacturers; businesses urge policy action

 Business leaders and policymakers have called for reforms to Bangladesh's financial system, saying limited access to finance continues to hold back private sector investment despite recent improvements.

Business leaders warn that manufacturers are facing mounting cash-flow pressures due to rising gas prices, while limited access to finance continues to constrain private sector investment and economic growth.

The call came at a roundtable titled "Access to Finance in Bangladesh: Building a More Conducive Financial System for the Private Sector," jointly organised by Policy Exchange Bangladesh and the Metropolitan Chamber of Commerce and Industry (MCCI), with support from the Australian Government's Department of Foreign Affairs and Trade (DFAT).

The discussion highlighted the findings from the Bangladesh Business Index (BBX) 2024-25, which identified access to finance as the weakest of the 11 pillars assessing the country's business environment.

Although the score improved by 12 points from the previous year, it stood at only 40.07 out of 100, indicating that financing constraints remain one of the most significant obstacles to private sector growth.

Speaking at the event, Shams Mahmud, managing director of Shasha Denims Ltd, said Bangladesh's manufacturing sector is still struggling to recover from the combined effects of the Covid-19 pandemic and subsequent political and economic disruptions.

"Higher gas prices have significantly increased production costs, worsening cash-flow shortages and making it more difficult for manufacturers to secure working capital needed to sustain operations and expand production," he noted.

Delivering the keynote address, Shams Zaman, country managing partner of PricewaterhouseCoopers Bangladesh Pvt Ltd (PwC), stressed that restoring confidence in the financial sector requires credible resolution of distressed assets and stronger governance.

He said rebuilding trust would enable banks to extend fresh credit more effectively while also highlighting the need to develop long-term financing mechanisms beyond the banking sector. He also recommended transforming the government's Credit Guarantee Window into an autonomous and professionally managed institution capable of supporting a more diversified financial system.

A panel discussion moderated by Dr Masrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, brought together senior representatives from the banking sector, multinational financial institutions and business associations.

Syed Mohammad Kamal, president of the American Chamber of Commerce in Bangladesh (AmCham), said small and medium-sized enterprises (SMEs) continue to face greater financing barriers than large corporations because they lack institutional access to credit.

He called for stronger coordination among Bangladesh Bank, the judiciary and other relevant agencies to create a more supportive financing ecosystem for SMEs.

Syed Abdul Momen, additional managing director and head of SME Banking at BRAC Bank PLC, said expanding SME lending will require a stronger digital ecosystem, arguing that the country's largely manual lending process remains inefficient and costly.

Meanwhile, Andalib Mirza, head of Multinational Wholesale Banking at HSBC Bangladesh, pointed to limited digital financial data and weak verification systems as major constraints, particularly for companies outside the ready-made garment export sector that often lack internationally verifiable financial records.

Participants representing banks, non-bank financial institutions (NBFIs) and development partners also highlighted infrastructure bottlenecks, saying financial institutions remain reluctant to finance new industrial projects unless energy supplies become more reliable.

They stressed that improving gas availability and expanding liquefied natural gas (LNG) infrastructure are essential to restoring investor confidence and supporting industrial expansion.

The discussion also noted encouraging progress in microenterprise financing, with lenders reporting relatively low non-performing loan ratios and growing success in meeting the financing needs of small businesses through multiple lending channels.

As the distinguished guest, Mohammed Nurul Amin, chairman of Bangladesh Krishi Bank, said Bangladesh's financial policies should better reflect regional, gender and socio-economic disparities among borrowers.

He argued that differentiated lending policies tailored to borrowers' circumstances would improve financial inclusion and strengthen the effectiveness of credit programmes.

The session was chaired by Kamran T Rahman, president of MCCI, while Farooq Ahmed, secretary-general and chief executive officer of the chamber, delivered the welcome remarks.