Lending Volumes Plummet as Banking Client Base Expands

A striking anomaly has surfaced within the Bangladeshi financial sector, as the total volume of consumer debt experienced a dramatic contraction despite a significant increase in the number of active borrowers. Over the three-month period spanning July to September, the total value of outstanding consumer loans dropped by approximately 22,281 crore BDT. Paradoxically, during this same window, the number of individuals holding consumer credit grew by nearly 600,000, suggesting a radical shift toward smaller, more frequent borrowing patterns across the nation.

This downturn follows the political transition earlier this year, which has left a significant portion of the banking sector—estimated at nearly twenty-five percent—operating under restricted lending conditions. According to official data from the central bank, the total outstanding consumer credit fell to 1.50 trillion BDT by the end of the third quarter, down from 1.72 trillion BDT in June. This reduction means that consumer credit now represents only 8.63% of the total banking sector’s loans, a decline from its previous share of 9.95%. Financial analysts attribute this shrinkage not only to a slowdown in new large-scale lending but also to the aggressive writing off of defaulted loans by banks seeking to clean up their balance sheets under revised regulatory frameworks.

While the monetary value of the debt has diminished, the consumer base has expanded from 4.92 million to over 5.50 million clients. This rise is largely credited to the digitisation of personal credit, with institutions like BRAC Bank, City Bank, and Prime Bank leading the charge. By offering instant, salary-backed digital loans that can be approved via mobile applications, these banks have successfully attracted a younger, more tech-savvy demographic. These loans are often smaller than traditional mortgages or vehicle finance, which explains why the number of people in debt can rise while the total amount of money owed to banks falls.

The sector-specific data highlights a particularly sharp decline in borrowing for consumer durables, such as televisions, air conditioners, and computers, which saw a drop of nearly 10,000 crore BDT. In contrast, certain segments like credit cards, educational expenses, and wedding-related loans have remained remarkably resilient. Currently, interest rates for these products vary significantly, with personal loans generally ranging between 11% and 14%, while credit card rates can reach as high as 25%. Despite these costs, the convenience of digital access and the necessity of managing cash flow in a volatile economy continue to drive the expansion of the borrower population.