International

High Interest Rates Threaten Jobs and Stability in Bangladesh’s SME Sector

Small and medium enterprises (SMEs), the lifeline of Bangladesh’s economy, are increasingly at risk due to rising interest rates that are stifling credit access and threatening millions of jobs. With over 1.18 crore SMEs contributing around 30% of the country’s GDP and employing 2.4 crore people—70% of whom are based outside Dhaka—the sector now finds itself under serious pressure.

Despite government claims of supporting SMEs, lending rates remain disproportionately high. While agriculture and large industries access loans at around 12%, SME interest rates range from 13% to 15%. According to Bangladesh Bank, the average SME lending rate in April 2024 stood at 12.49%, higher than agriculture (11.98%) and large industry (12.45%).

Banks attribute the elevated rates to high operational costs, limited rural outreach, and risk management challenges. City Bank’s Deputy Managing Director Kamrul Mehedi cited additional processing and servicing costs as key reasons for the rate gap, especially in rural areas.

Loan disbursements are declining. In the October–December quarter of FY2024-25, SME loans fell by 3.49% year-on-year. BRAC Bank’s Abdul Momen admitted that interest rates of 13–15% reflect an attempt to balance affordability and operational feasibility. However, processing fees remain a major burden—up to 10% for small loans compared to nearly zero for large corporates.

SME Foundation Chairperson Mushfiqur Rahman acknowledged the systemic hurdles, including strict collateral policies and limited outreach. Though programs offering 9% interest loans and stimulus packages have helped, broader intervention is essential.

Experts warn that without immediate measures to reduce borrowing costs and expand rural access, SMEs will struggle to survive—endangering economic stability and millions of livelihoods across Bangladesh.

Jeewan Dahal

I have done training in Neuro-linguistic programming. Based in Sikkim, own The Sikkim Today & Hillrooms- supporting the growth of entrepreneurship around the NorthEast.

Recent Posts

Team Sikkim Participates in Major Regional Review Meeting in the National Capital

Officers from the Animal Husbandry & Veterinary Services (AH&VS) Department Government of Sikkim, led by…

8 hours ago

NSE crosses 23 crore (230 million) investor accounts

• Assam Ranks 16thin the country with 25.9 Lakh NSE Investors • Women Investors 6th Highest in…

2 days ago

Over 300 Buddhist Stupas and Sacred Statues Destroyed in Tibet

Chinese authorities have reportedly demolished over 300 Buddhist stupas and sacred statues in Drakgo (Chinese:…

1 week ago

SEBIvsSCAM: SEBI and NSE Join Forces to Protect Investors from Financial Frauds

Securities and Exchange Board of India (SEBI) has launched a nationwide investor awareness campaign titled…

1 week ago

Teacher, Two Others Arrested in Sikkim for Assaulting Class 7 Girl

School Teacher, Two Others Held for Alleged Sexual Assault on 14-Year-Old Class 7 Student Police…

3 weeks ago

Sikkim Participates in National Workshop on Sports and Human Capital Development

The Secretary of the Department of Sports and Youth Affairs, Yangchen Doma Tamang (SCS), along…

4 weeks ago