Bangladesh’s banks have recorded their lowest level of lending to small and medium-sized enterprises (SMEs) in four years, signalling a sharp slowdown in credit demand amid political unrest and sluggish economic activity.

Data from Bangladesh Bank show that in fiscal year 2024–25, banks disbursed Tk 2.05 lakh crore in SME loans, a 9 percent decline from the previous year, breaking a three-year streak of steady growth in small-business financing.

Industry leaders say the downturn reflects a collapse in business confidence as entrepreneurs grapple with inflation, shrinking demand, and lingering political instability.

“Businesses do not want to invest in times of uncertainty. Right now, firms are focused on survival, not expansion,” said Syed Abdul Momen, additional managing director and head of SME Banking at BRAC Bank PLC, one of the largest SME lenders in the country.

Bangladesh has an estimated 7.8 million cottage, micro, small, and medium enterprises, which together contribute about a quarter of the national GDP and employ millions. Lending to the sector had been recovering since 2021, after a sharp decline induced by the pandemic, but bankers say that momentum has now stalled.

Persistent inflation and liquidity stress in the banking system have further constrained lending. As of June 2025, outstanding SME loans stood at Tk 3.10 lakh crore — marginally higher than a year earlier, indicating minimal expansion.