78% of all loans in Bangladesh concentrated in Dhaka, Chattogram: PRI study
This leaves the rest of the country behind
More than 78% of all loans in Bangladesh are concentrated in just two metropolitan areas, Dhaka and Chattogram, leaving the rest of the country lagging far behind, according to a Policy Research Institute (PRI) study.
A keynote presentation by the PRI today (25 September) highlighted how this concentration undermines inclusive growth and employment generation in the country.
Presenting the findings at the seminar titled "Can Bangladesh develop without decentralising?" at PRI's Dhaka office, PRI Director Ahmad Ahsan said Bangladesh is among the most centralised countries in the world relative to its size, with over-centralisation evident in public service delivery, urban governance, and financial flows.
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"In FY24, 78.4% of loans were issued in Dhaka and Chattogram, while SMEs across other districts struggled to access credit," he noted.
Of the top five districts, Dhaka accounted for 62.95% of loans, Chattogram 15.45%, Narayanganj 1.54%, Khulna 1.27% and Rajshahi 1.27%. At the bottom end, Bandarban received 0%, Khagrachhari 0.06%, Rangamati 0.06%, Meherpur 0.07% and Jhalakathi 0.08%, he further said.
According to the PRI director, the numbers give an idea of the heavy financial concentration which limits new enterprise creation outside the two cities, stifling employment opportunities and deepening regional inequalities.
He also noted that, "Bangladesh has expanded its banking and credit sectors, but the benefits remain spatially unequal. SME development outside major cities is underpowered because most loans and banking services are confined to Dhaka and Chattogram."
"This has significant implications – employment growth in urban industrial sectors has slowed between 2017 and 2022 compared to 2010 and 2017. The underdevelopment of SMEs and the lack of decentralised banking reduce the prospects of inclusive industrialisation," he added.
PRI also found that Bangladesh's 12 city corporations and 325 municipalities function under more than 40 ministries and agencies. "This leaves mayors 'almost powerless' to coordinate infrastructure, water, power, education, or health services," Ahsan said.
The institute recommended raising local government allocations to at least 1% of GDP initially, strengthening property tax collection in Dhaka and Chattogram (currently just 0.13% and 0.06% of GDP, respectively), and introducing annual scorecards on services, investment climate and financial management.
Discussant M Masrur Reaz, chairman and CEO of the Policy Exchange of Bangladesh, said, "Economic activities remain heavily concentrated in Dhaka and Chattogram divisions, particularly in the cities. Due to this overconcentration, traffic congestion in Dhaka alone costs an estimated $4 billion annually."
He stressed greater coordination between central and local governments to improve efficiency, reduce wastage and maximise public service delivery.
The session was chaired by PRI Executive Director Dr Khurshid Alam, who called for an inclusive dialogue on strengthening local government institutions as a cornerstone of governance reforms.
While addressing the seminar as the chief guest, Badiul Alam Majumdar, member of the National Consensus Commission and head of the Election Reform Commission, emphasised on the need for decentralisation and accountability.
"To increase accountability, it has to be done through the people. For this, decentralisation is necessary. Decentralisation means decentralisation of power and facilities.
"We have had developments such as Metrorail, Padma Bridge, Elevated Expressway but we have not prospered. Improvement should mean improvement in people's health, education, and quality of life. We need to bring changes in our local governance system, without this, decentralisation is not possible," he said.
