Businesses in Bangladesh are settling letters of credit (L/Cs) in order to take advantage of the strength of the taka against the US dollar.

This in turn is helping Bangladesh sustain a period of strong private sector credit growth.

Exchange rates

The recent spike in the taka-dollar exchange rate has contributed to strong credit growth according to managing director and CEO of NCC Bank, Golam Hafiz Ahmed.

He says businesses are making early payments against their L/Cs to take advantage of these favourable conditions.

Other factors underpinning strong credit growth in Bangladesh include a surge in lending to small businesses due to low interest rates.

Infrastructure boost

Credit growth is also substantially sustained by the government's ambitious infrastructure spending programme.

A raft of mega infrastructure projects has precipitated a surge in imports, underpinned robust L/C flows and contributed to higher credit growth.

Consumer finance

Retail banking products such as consumer loans and credit cards have also contributed to higher credit growth according to managing director and CEO of Trust Bank, Ishtiaque Ahmed Chowdhury.

He reckons this may have been stimulated by the central bank raising the credit ceiling for credit cards and consumer loans.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.