Private sector credit growth in Bangladesh has decelerated to its slowest rate in three years, largely due to investment uncertainty following recent political changes.

According to the latest data from the Bangladesh Bank, private sector credit growth cooled to 9.20% in September, down from 9.86% the previous month. This marks the lowest growth rate since September 2021, when it stood at 8.77%.

Industry experts cite multiple factors for the slowdown, including banks’ cautious approach, persistent inflation, increased lending rates, and sluggish loan recovery.

The September credit growth rate was 0.60 percentage points below the Bangladesh Bank’s target of 9.80% for the month.

Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, attributed the decline to both domestic and global challenges.

“Inflation, investment uncertainty, law-and-order issues, and unreliable power and gas supplies have dampened credit growth,” he said. Bangladesh’s inflation rate has remained above 9% since March 2022, reaching 10.87% in October, according to the Bangladesh Bureau of Statistics.

Rahman noted that banks are taking a conservative stance in the face of economic uncertainties, with some banks also constrained in their lending capacity.

Sohail RK Hussain, Managing Director of Bank Asia, added that rising costs due to the currency devaluation against the U.S. dollar have stalled investment and expansion projects. “For instance, monthly imports have dropped significantly, which has reduced the demand for loans,” Hussain explained.

Bangladesh Bank’s recent policy rate hikes have also contributed to the slowdown. On October 22, the bank raised its policy rate by 50 basis points to 10%, marking the 11th increase since May 2022, when the rate was at 5%.