Consumer Credit Shrinks Despite Influx of Borrowers

The Bangladeshi financial landscape has witnessed a peculiar contradiction over the final quarter of the year, as a surge in the number of individual borrowers has failed to prevent a substantial drop in the total value of outstanding consumer debt. Between July and September, the volume of consumer loans fell by a staggering 22,281 crore BDT, even as the banking sector welcomed approximately 583,000 new clients into its retail credit portfolios. This divergence marks a significant departure from the previous quarter, where credit figures were buoyed by a growth of 25,000 crore BDT, signaling a shift in how both banks and the public are navigating the current economic climate.

Central bank statistics indicate that the total outstanding consumer credit stood at 1.50 trillion BDT by the end of September, a sharp descent from the 1.72 trillion BDT recorded at the end of June. In terms of market share, consumer lending now accounts for just 8.63% of the total banking credit, down from nearly 10% only three months prior. Experts suggest that the political upheaval following the collapse of the previous administration has forced many lenders to tighten their belts, with roughly a quarter of the nation’s banks currently facing liquidity constraints that have virtually frozen their lending operations. Moreover, many institutions have taken advantage of flexible regulations to write off defaulted consumer loans, which has contributed to the lower outstanding balance on paper.

While traditional lending for large-scale purchases has cooled, the appetite for smaller, more accessible credit lines has grown. The number of borrowers rose from 4.92 million to over 5.50 million during this period, driven largely by the success of digital lending platforms and salary-linked credit products. Leading private banks, such as BRAC Bank, have been at the forefront of this movement, offering instant digital loans of up to 20 lakh BDT to tens of thousands of customers. These smaller ticket sizes explain why the headcount of borrowers can rise even as the total debt volume falls, as many large-scale loans for vehicles and property are being replaced by smaller personal loans for daily subsistence or emergency costs.

The detailed breakdown from Bangladesh Bank highlights that while sectors like transport and durable goods have struggled, interest remains high in credit cards and loans for education, weddings, and travel. This suggests a transition in consumer behaviour where borrowing is being utilised to manage immediate lifestyle needs rather than long-term asset accumulation. Despite interest rates for personal loans currently ranging from 11% to 14%, and credit card rates reaching up to 25%, the accessibility of these funds through digital channels continues to attract a broader demographic of the population, even if the individual amounts borrowed are more modest than in previous years.