Bangladesh Krishi Bank (BKB) is facing mounting pressure after falling significantly behind its lending targets for the Cottage, Micro, Small and Medium Enterprise (CMSME) sector, a shortfall that is now jeopardising its access to incentive financing from the Bangladesh Bank.
According to an internal BKB report, the state-owned lender was assigned a target of disbursing Tk12,500 crore in CMSME loans during the current fiscal year. However, as of 27 November, actual disbursements stood at only Tk2,363 crore—barely 18.91 per cent of the annual goal. The sluggish performance has raised concerns within regulatory and policy circles, given the central role of CMSMEs in employment generation and grassroots economic activity.
The shortfall also places BKB at odds with broader regulatory expectations. In a circular issued on 17 March, the Bangladesh Bank underscored the strategic importance of the CMSME sector by directing that, by the end of 2025, at least 25 per cent of every bank’s total outstanding loans must be allocated to CMSMEs. Yet BKB has so far failed to meet this benchmark. Data show that by the end of November the bank’s total outstanding loan portfolio amounted to Tk35,337 crore, of which CMSME loans accounted for Tk6,641 crore—approximately 19 per cent of the total.
A senior BKB official, speaking on condition of anonymity, attributed the underperformance to a combination of economic and administrative factors. He noted that demand for CMSME loans has weakened as inflation has eroded purchasing power, leading to reduced demand for goods and services produced by small and micro enterprises. “When market demand falls, entrepreneurs are understandably reluctant to take on new debt,” he explained.
The official further pointed to procedural delays following the formation of the current government. Enhanced scrutiny of loan approvals, though aimed at improving governance and reducing risk, has slowed disbursement timelines. “Loan processing now takes two to three weeks longer than before, which has directly affected our ability to meet disbursement targets,” he added.
The timing of the shortfall is particularly problematic, as the Bangladesh Bank is actively encouraging lenders to expand CMSME financing. To this end, it has continued a Tk25,000 crore pre-financing scheme, originally launched in 2022 and extended again on 12 November after expiring in July. Under the scheme, banks receive funds from the central bank at a concessional interest rate of 2 per cent, while the maximum lending rate to end borrowers is capped at 7 per cent.
BKB’s failure to meet CMSME targets is reportedly hindering its access to this highly advantageous facility. Recognising the seriousness of the situation, Managing Director Sanchia Binte Ali expressed dissatisfaction over the bank’s performance at a meeting held earlier this month. She urged officials at all levels to intensify efforts to boost CMSME lending, warning that continued underachievement could undermine both the bank’s developmental mandate and its financial incentives.
As policymakers continue to place CMSMEs at the heart of Bangladesh’s economic strategy, BKB’s ability to realign its lending performance with national priorities will be closely watched in the months ahead.