Bank lending to small and medium-sized enterprises (SMEs) in Bangladesh has fallen to its lowest level in four years, as political uncertainty and a slowing economy have weakened business confidence and dampened borrowing appetite among entrepreneurs.
According to data from Bangladesh Bank (BB), banks disbursed Taka 2.05 lakh crore (approximately US $ 17.4 billion) in SME loans during the 2024–25 financial year, representing a 9% year-on-year decline. The fall marks a reversal of the upward trend in SME financing that had persisted since 2021, following the sharp contraction during the Covid-19 pandemic.
Bangladesh’s 78 lakh cottage, micro, small, and medium-sized businesses, which collectively account for around one-fourth of the nation’s GDP, are referred to as the backbone of the industrial sector.
Industry leaders attributed the slowdown to a mix of political unrest, high inflation, and weaker market sentiment. Syed Abdul Momen, Additional Managing Director and Head of SME Banking at BRAC Bank PLC, said that in times of uncertainty, businesses tend to postpone investment decisions. He noted that many firms are now prioritising survival rather than expansion.
Kamrul Mehedi, Deputy Managing Director and Head of SME and Agent Banking at City Bank PLC, said that a series of disruptions—including the pandemic, the war in Ukraine, and domestic political unrest—had eroded business resilience. He estimated that almost one-quarter of small firms had ceased operations since 2020.
As of June 2025, outstanding SME loans stood at Taka 3.10 lakh crore (around USD 26.3 billion), slightly higher than the previous year, according to Bangladesh Bank data.
Salekeen Ibrahim, Executive Vice President of Eastern Bank PLC, said that SME loan disbursement had reached its lowest level in recent years, reflecting the difficult macroeconomic environment.
Despite the downturn, lenders remain cautiously optimistic. Several bankers suggested that both loan demand and disbursement volumes could recover following the national election scheduled for February 2026, provided political stability returns and economic confidence improves.