The ready-made garment (RMG) and textile sectors, Bangladesh’s largest sources of export earnings and employment, are also among the biggest defaulters in the banking system, according to the latest Financial Stability Report by Bangladesh Bank.
Data from the report show that in 2024, the gross non-performing loan (NPL) ratio reached 26% in the RMG sector and 25% in textiles. Only shipbuilding and leather performed worse, both recording a 39% NPL ratio.
The NPL ratio represents the share of defaulted loans in total outstanding loans. For instance, in the leather sector, Taka 39 of every Taka 100 borrowed has gone unpaid. Other industries fared slightly better: construction had an NPL ratio of 24%, transport 20%, and agro-based industries 14%. By contrast, pharmaceuticals (6%), agriculture (11%), and housing (12%) had the lowest default levels.
Despite the repayment concerns, the apparel industry continues to dominate Bangladesh’s economy. In FY2024-25, the sector exported goods worth over US $ 39 billion, contributing 84% of total export receipts, according to the Export Promotion Bureau (EPB). The industry also provides jobs for nearly four million workers, the majority of whom are women.
Industry insiders say smaller companies are most vulnerable to defaults, while large exporters remain relatively stable.
“Big players have bargaining power with banks and logistics providers, allowing them to withstand global price shocks. But smaller firms face higher costs and financial strain,” said Anwar-ul Alam Chowdhury, president of the Bangladesh Chamber of Industries and former head of the BGMEA.
Bankers echo similar concerns. Mutual Trust Bank Managing Director Syed Mahbubur Rahman noted that many small and mid-sized factories became distressed after the pandemic, exacerbated by persistent energy shortages. “We financed one firm that struggled with power outages for a year. Eventually, it became a nonperforming borrower. This is not uncommon,” said Rahman, also a former president of the Association of Bankers Bangladesh (ABB).
The sector’s struggles are also reflected in the capital market. Out of 58 listed textile and garment companies on the Dhaka Stock Exchange, 25 are classified as junk stocks, while 17 are in the low-performing B category. In total, more than 70% of listed firms in the sector are failing to generate profits.
Economist M Masrur Reaz, chairman of Policy Exchange of Bangladesh, said the sector’s financial troubles intensified as global demand slowed following the pandemic. He added that the energy crisis left many textile mills operating at just 40 to 50% capacity.
“Nearly 300 companies have become financially distressed over the past couple of years. The BGMEA is now considering an exit policy for them,” Reaz noted.
He also pointed to long-standing challenges in other sectors: shipbuilding has been weakened by global downturns, while the leather industry continues to face compliance hurdles that limit exports.
“These high NPL ratios should serve as a wake-up call,” Reaz warned. “If key export sectors remain in distress, it will hurt both the country’s export growth and employment generation.” He urged the government to reassess sector-specific policies and consider restructuring options for struggling firms, alongside a planned exit strategy for those beyond recovery.
