78pc loans concentrated on Dhaka-Chattogram

Staff reporter :

Nearly 78 percent of all loans in Bangladesh are concentrated in just Dhaka and Chattogram, leaving the rest of the country’s districts struggling for access to finance, according to a new Policy Research Institute (PRI) report.

The findings were presented on Thursday at a PRI event titled “Can Bangladesh develop without decentralising?” held at the organisation’s conference room in the capital.

“Bangladesh is one of the most centralised countries in the world compared to its size,” said PRI Director Ahmad Ahsan while presenting the keynote.

He noted that the country’s over-centralisation is not only evident in financial flows but also in public service delivery and urban governance.

“About 78 percent of loans are issued in Dhaka and Chattogram, while small and medium enterprises [SMEs] across other districts face severe challenges in accessing credit,” Ahsan said.

This imbalance, he argued, restricts new enterprise creation, curbs employment opportunities, and widens regional inequality. Although the banking sector has expanded, the benefits remain “spatially unequal,” with SME development in smaller towns and districts falling behind.

The research also showed that employment growth in urban industries slowed between 2017 and 2022 compared to 2010–2017, partly due to weak decentralisation of credit.

The PRI findings also highlighted structural governance problems. Bangladesh’s 12 city corporations and 325 municipalities are managed under more than 40 ministries and agencies, leaving mayors “almost powerless” to coordinate services in infrastructure, water, power, education, or health.

To tackle these challenges, PRI recommended raising local government allocations to at least 1percent of GDP in the initial stage, strengthening property tax collection in Dhaka and Chattogram, which currently contributes only 0.13 percent and 0.06percent of GDP, respectively and introducing annual scorecards for local governments covering service delivery, investment climate, and financial management.

Dr Badiul Alam Majumdar, member of the National Consensus Commission, emphasised that decentralisation must involve both power and resources.

“We have developed mega projects like Metrorail, Padma Bridge, and the Elevated Expressway, but true prosperity should be reflected in people’s health, education, and quality of life. Without reforming our local governance system, decentralisation will remain impossible,” he said.