Dhaka, Bangladesh (BBN) – Credit for luxuries is still growing strong, indicating a rise of the consumer class in the country, despite repeated attempts by the central bank to divert loans to productive sectors.

The Bangladesh Bank said increasing number of people are using consumer financing schemes launched by the commercial banks to whet their appetite for cars, motor bikes, freezes and televisions.

The country’s 48 commercial banks have lent BDT 7.63 billion for consumer goods in March this year, registering a 73 percent growth over that of the same period of the previous year, the data showed.

The banks’ lending to apartment purchase has also risen by 24.66 per cent during the period, reflecting soaring spending by the middle class and rich people, central bank officials said.

Purchase of goods using credit cards went up by 83.64 per cent while land acquisition loan climbed by 45.19 per cent.

“These are very interesting data. It shows our consumers are flexing their muscles despite a very tough economic environment both at home and abroad,” said a BB official said.

He termed the trend “not beneficial” for the economy as it came at a time when the country needs increasing investment in productive sectors such as manufacturing, agriculture and small and medium enterprises to counter the fallout of the global recession.

Top bankers admitted massive growth of consumer credit is the least thing they want at the moment, but said they needed to invest their excess liquidity “anywhere” including consumer financing because of less demand for loan in productive sectors.

“Credit to project financing has decreased in the recent months because of shortage of gas and electricity supplies particularly to the industrial units,” Managing Director and Chief Executive Officer of Agrani Bank Syed Abu Naser Bukhtear Ahmed told BBN in Dhaka.
Mr. Bukhtear said most of the banks have stepped up their efforts to invest in manufacturing and agriculture and other productive sectors. “But the demand is not significant.”

“As a result we are trying to invest our excess liquidity in others sector to minimise cost of our funds,” he added.

The central bank data showed BDT 1.82 billion was invested for purchasing flats in March 2009 compared to BDT 1.46 billion in the same period last year.

“Demand in the real estate is growing steadily despite slowdown in other sectors. Clients find investment in apartment still appealing despite high cost of flats in the country,” said another banker.

He added most of the banks are now investing their excess funds in retail loans.

During the period, marriage loan went up by 30.00 per cent compared to the same period of the previous year while loan for medical treatment increased by nine per cent.

The central bank in successive monetary policies this year said that it would facilitate “economic growth through more investments in the real sectors like agriculture and the SMEs.”

BBN/SS/SI/AD-18October09-2:41 am (BST)