Dhaka, Bangladesh (BBN) – Credit to private sector dipped below 14 per cent in September — the first time in about two years — as lending to new factories dried up due to an acute energy crisis and a major fall in exports, officials said.

The Bangladesh Bank (BB) statistics revealed the grim figure on Sunday, showing that private sector credit has come down to 13.65 per cent in September, from 14.26 per cent in August and almost half that of the same month last year.

Banks lent private companies, flat buyers, consumers, farmers and traders BDT 272.492 billion in September 2009, down from BDT 418.662 billion in the same month last year, the BB data showed.

Officials said the rate was the lowest since the second part of the 2007-8 fiscal year when industrial production started to rise from the downturn caused by the takeover of the army-backed caretaker government in early 2007.

“We thought credit flow would grow in September as August figures have showed first increase in ten months. But the opposite has happened,” a senior BB official said.

He blamed the global recession and a nationwide acute crisis of gas and electricity for the fall.   

The country’s exports have declined more than 28 per cent in September and more than 11 per cent in the first quarter, the worst performance since 2001-2002, as recession-hit western retailers cut orders for apparel items from Bangladesh.

“The entrepreneurs are cautious in investing in new facilities or expanding their existing units against the backdrop of global meltdown. As a result, there is fewer demand for project loans,” he said.

 “New entrepreneurs are also not interested to set up industrial plants due to shortage of gas and electricity,” Managing Director and Chief Executive Officer of Agrani Bank Limited Syed Abu Naser Bukhtear Ahmed told BBN in Dhaka.

Mr. Bukhtear said credit flow to private sector would grow gradually as soon as the government can ensure better supply of gas and electricity.

Credit flow to the private sector has been declining since October 2008 because of a ‘go-slow’ policy adopted by the businessmen to avoid any financial risk in the face of global recession, central bank officials said.

The growth came down to 24.72 per cent in October 2008 from a record high of 26.55 per cent in the previous month, they said.

Bukhtear and BB officials have said that private credit would pick up sharply if the government could fast-track projects under the newly-launched public private partnership (PPP) investment initiative.

“There is no big push for investment in private sector due to lack of big government projects. If the government can launch PPP projects quickly, it would create big demand for credit from the private sector,” another BB official said.

BBN/SS/SI/AD-23November09-9:44 am (BST)