In Bangladesh’s banking sector, a long-standing rule often slows down growth for companies that are otherwise doing well. If one firm within a business group falls into repayment trouble, banks usually refuse loans to all related companies, even those that remain financially strong and profitable. This practice has left many high-performing businesses struggling to access the funds they need to expand, invest in technology, or maintain jobs. In April 2024, the central bank introduced a policy to address this issue by allowing credit to solid companies in such groups, but the process remains slow, complex, and filled with approvals that discourage banks from using it effectively. Experts argue that lending decisions should be based on the health of each company individually rather than on the performance of its affiliates. They point to models from other countries where each firm is assessed on its own merits, with robust risk evaluation systems and safeguards to ensure responsible lending. A proposed solution for Bangladesh is a faster credit approval framework using a simple rating system—green for low risk, amber for moderate risk, and red for high risk. Under this plan, green-rated companies could access loans of up to around Tk 50 crore without waiting for lengthy approvals, provided the lending bank submits post-approval reports to the central bank. To prevent misuse, the system would rely on strong monitoring tools, such as quarterly performance reviews, digital tracking of fund usage, and strict compliance with loan agreements. A secure online portal connecting banks with the central bank could further reduce delays and paperwork, while creating transparency in the process. Experts also stress the importance of balanced incentives and penalties—rewarding banks that follow the rules and penalizing those that take unnecessary risks. This approach would not only help healthy companies access much-needed capital but also contribute to the broader economy by creating jobs, encouraging investment, and keeping supply chains running. Addressing credit bottlenecks in this way could also help bring down the country’s growing default loan rate by focusing on borrowers with strong repayment histories. By replacing rigid, blanket restrictions with targeted flexibility and close oversight, Bangladesh can encourage growth while maintaining financial stability. Such a policy shift would send a strong message that the banking system supports entrepreneurship, competitiveness, and economic resilience. If implemented well, fast-tracking credit to performing businesses could become a win-win strategy for both lenders and the economy at large.
