CMSME lending declines in Q1 of FY’26

Business Report :

The volume of lending to the country’s Cottage, Micro, Small, and Medium Enterprise (CMSME) saw a substantial fall during the July -September quarter (Q1) of financial year of 2025-26.

Bangladesh Bank data showed that CMSME loan disbursement fell to Tk 48,144 crore during the quarter, down from Tk 51,176 crore in April-June (Q4) FY25.

Correspondingly, outstanding loans increased to Tk 3,12,512 crore in July-September from Tk 3,10,761 crore a year earlier, indicating that repayments slowed as well.

Private commercial banks accounted for about 70 per cent of the outstanding CMSME portfolio, followed by state-owned banks at 20 per cent, specialised banks at 2 per cent and foreign banks at 1 per cent.

Bankers said many small and medium businesses postponed investment and expansion decisions ahead of the national election scheduled for February 12, choosing to conserve cash instead of taking fresh loans.

Many enterprises linked to the previous regime either shut down or scaled back operations, while others adopted a wait-and-see approach in anticipation of policy direction under the next government.

This hesitation directly affected demand for credit, particularly among smaller firms that are more sensitive to political and market signals.

At the same time, stress within the CMSME segment remained elevated.
Default loans in the sector increased to Tk 88,700 crore or 28 per cent of total outstanding portfolio of Tk 3,10,761 crore, reflecting weak cash flows and limited repayment capacity.

Rising defaults have made banks more cautious, leading to tighter screening and slower loan approvals even for viable borrowers.

Macroeconomic pressures further weighed on the sector.

The depreciation of the taka increased the cost of imported raw materials and intermediate goods, raising production costs for businesses dependent on imports.

While some firms sought additional financing to cope with higher expenses, others-especially those with dollar-denominated liabilities-faced higher repayment burdens, reducing their ability to absorb new debt.

A 2019 Planning Division report found that small and medium-sized enterprises account for 69.9 percent of total manufacturing value-addition. But without capital backing, industry insiders say, growth is losing momentum.