A worker is working at a RMG factory in Bangladesh. Photo: BBN

Dhaka, Bangladesh (BBN) – Private sector credit growth increased significantly in August this calendar year mainly due to higher trade financing by banks for settling import payment obligations.

Higher disbursement of consumer, SME and farm loans have also pushed up the growth in credit flow to private sector during the period under review, according to officials and bankers.

The private sector credit growth rose to 17.84 per cent, which is nearly six-year high, in August 2017 on a year-on-year basis from 16.94 per cent a month ago. It was 15.66 per cent in June 2017.

The last time the private sector credit growth was as high was back in November 2012, when 17.40 per cent was registered.

Such credit growth has already crossed the target, set by the central bank of Bangladesh in its latest Monetary Policy Statement (MPS).

Earlier on July 26 this calendar year, the central bank in its first half-yearly (H1) MPS for the FY 18, projected that the private sector credit would grow at 16.2 per cent in December 2017 and at 16.3 per cent in June 2018.

They also said the upward trend in private sector credit growth may continue in the coming months due to higher import payment pressure on the economy.

Bangladesh’s overall imports grew by more than 31 per cent to $ 9.42 billion in the July-August period of this FY, from $7.16 billion in the same period of the last FY.

Lower interest rates on lending and political stability have encouraged the entrepreneurs to borrow more from local sources to meet their growing demand for investment, they added.

The weighted average interest rates on lending came down to 9.46 per cent in August 2017 from 10.24 per cent a year before.

Besides, the growing demand for investment, particularly in power and telecommunication sectors is expected to push up the credit demand in the next couple of months.

The total outstanding loans with the private sector rose to BDT 7,918.07 billion in August 2017 from BDT 7,780.16 billion in July 2017. It was BDT 6,719.25 billion in August 2016.