Steps needed to overcome the industrial defaults

The manufacturing sector is one of the driving forces of Bangladesh’s economy. This sector plays an important role in domestic consumption, employment generation, and export earnings.

A large portion of the country’s total employment is created in the sector. But it is now burdened with huge defaulted loans.

According to report published in this newspaper yesterday, manufacturing industries such as leather, ready-made garments, textiles, shipbuilding and shipbreaking are at the top of the list of defaulters.

The Central Bank’s Financial Stability Report states that 49.28 percent of the total loans in the banking sector have been disbursed to the manufacturing industries as of December 2024. The default loan rate is the highest compared to the loans disbursed.

Economists say that during the past decade and a half of the previous government’s rule, unprecedented looting was carried out by seizing banks.

A large portion of the looted money was smuggled abroad through loans. But those loans are not being collected now. Due to non-collection, the bank is marking them as defaulters.

As a result, defaulted loans are increasing. Recovering these loans, they feared will be extremely difficult.
Many industries in this sector are in a state of ailing condition due to failure to repay loans.

This is having an impact on employment, the stability of the banking sector and the overall economy. Currently, one of the main problems in the country’s banking sector is non-performing loans, which are increasing day by day.

According to Bangladesh Bank data, the amount of non-performing loans in the banking sector stood at Tk 5.31 trillion at the end of last June.

More than 27 percent of the loans disbursed by banks have now gone into default, whereas in 2009, the amount of defaulted loans in the country’s banking sector was only Tk 22,482 crore.

Economists stress that strict legal action will have to be taken against willful defaulters. At the same time, if the import of raw materials and availability of fuel can be stabilized, the manufacturing sector will be able to turn around to some extent.

Non-performing loans in the manufacturing sector are not just a problem for banks or industrial owners; they are in fact weakening the entire country’s economy.

To ensure sustainable industrialization, it is essential to take effective measures to control defaulted loans now. Measures need to be taken so that genuine entrepreneurs can survive and the industrial sector can turn around again.