Small and medium enterprises (SMEs) across Bangladesh are facing a double setback, tight access to financing and weakening sales, as political instability, rising defaults, and persistent inflation weigh on the economy.
Banks, increasingly cautious in the current climate, are scaling back loan disbursements. At the same time, entrepreneurs say shrinking consumer demand has left them unable to sustain or expand operations.
Bangladesh Bank data show that SME loan disbursement dropped to Taka 47,821 crore in the first quarter of 2025, down from Taka 53,107 crore during the same period a year earlier.
Often described as the backbone of the economy, the country’s 78 lakh cottage, micro, small, and medium enterprises (CMSMEs) generate about a quarter of GDP and nearly 70% of manufacturing value-addition, according to a Planning Division report. But without easier access to credit, insiders warn, growth momentum is eroding.
Economists link the cautious stance of banks to the sharp rise in toxic assets. Non-performing loans (NPLs) stood at Taka 4.80 lakh crore in 2024, making Bangladesh the worst performer in Asia, with defaults accounting for more than one-fifth of total loans, according to the Asian Development Bank.
“The political shift last August exposed just how fragile the banking sector is,” said Sanjib Kumar Dey, head of SME at Mutual Trust Bank PLC. “As repayment risks rise, banks are forced to scrutinize applications more stringently.”
Other bankers agree the slowdown is demand-driven as well. “Many entrepreneurs are avoiding loans altogether because of uncertainty,” said Syed Abdul Momen, head of SME banking at BRAC Bank. “Even good clients are reluctant to borrow now.”
Still, industry leaders argue that banks must be more accommodating. “Collateral-free options, simpler processes, and tailored credit schemes are essential if SMEs are to survive,” said one trade body representative, stressing that the sector is vital for job creation and innovation.
Academics point out that financing gaps remain enormous. “Only about 28% of SMEs currently have access to formal credit, leaving a gap of US $ 2.8 billion,” said Melita Mehjabeen, professor at Dhaka University’s Institute of Business Administration. “Banks’ risk-averse approach is keeping many viable businesses starved of funds.”
With inflation still hovering above 8%, and consumer spending under pressure, experts warn that without urgent steps to strengthen financial inclusion, Bangladesh’s CMSMEs risk losing their role as the foundation of economic growth.
Bharat Tex Special Report 2026 
