Small entrepreneurs trapped in red tape as big defaulters thrive
Graphics: Agamir Somoy
Small entrepreneurs nationwide hit regulatory hurdles when applying for bank loans, yet large defaulters face virtually no legal enforcement.
Banks even award fresh loans to these defaulters under various pretexts - as seen with S Alam Group and Beximco Group - instead of taking basic recovery steps.
Interestingly, most of the small entrepreneurs who manage to obtain loans pay their installments on time. Yet, if they fail to pay an installment due to a valid reason, they face harsh enforcement measures.
Every rule is strictly imposed on them, with past instances showing small borrowers being jailed with ropes tied around their waists for defaulting on a mere Tk 400.
Rabiul Miya, a small jhut (garment waste) trader from the Tongi area of Gazipur, submitted his business trade license and other necessary documents to City Bank seeking a loan of Tk 5 lakh.
However, he failed to secure the credit due to regulatory red tape. Bank officials informed him that he had to apply fulfilling a series of tough conditions, including signatures from three guarantors and a Business Identification Number (BIN).
Since fulfilling these requirements was impossible for him, the businessman - harassed at every step - was forced to seek the help of a broker. As a result, the loan was sanctioned using the exact same documents submitted earlier, though he had to pay a bribe to the broker under the guise of a tip.
Rabiul voiced his frustration to Agamir Somoy, saying, “All the laws, regulations, and various conditions apply only to small businessmen like us. Meanwhile, for the big ones, everything is forgiven. They are hollowing out the banks, yet they are being granted massive loans with one concession after another.”
The widely discussed S Alam Group tops the list of defaulters after taking more than Tk 2.25 lakh crore in loans from various banks. Due to the group’s default, five Islamic banks became severely weakened, prompting the government to merge and take control of them after they failed to return depositors’ money.
Nevertheless, on August, Bangladesh Bank (BB) granted special permission to open Letters of Credit (LC) for SS Power-1 Limited, an entity of the group. State-owned Rupali Bank was authorized to open LCs for the firm against a 100 percent cash deposit, despite the Bank Company Act prohibiting defaulting entities from receiving credit.
Similarly, several entities under Beximco Group defaulted after taking nearly Tk 80 crore in loans. Even after Beximco LPG Unit-1 and Shinepukur Ceramics defaulted, the central bank exercised special powers to extend new credit facilities to them.
Regulatory concessions and disparity in loan distribution
Addressing the issue, BB Spokesperson and Executive Director Arif Hossain Khan told Agamir Somoy, “We have been urging an increase in loans for micro and small entrepreneurs. However, due to their limited logistical support, they face difficulties in securing loans.
‘On the other hand, Cottage, Micro, Small, and Medium Enterprises (CMSME) sector entrepreneurs are ahead in repaying bank loans. Concessions are granted to keep large businesses afloat in the greater national interest. If they perform well, the loans will be recovered. If they shut down, loan recovery will be hampered.”
An analysis of loan records reveals that around 5,000 industrial clients hold nearly Tk 6 lakh crore in loans, accounting for 33 percent of total banking credit. To keep large borrowers off default lists, massive outstanding loans are kept regular for up to 15 years through nominal down payments under the guise of loan rescheduling.
Moreover, exit policies and special concessions are offered to defaulters holding over Tk 1,000 crore. In contrast, banks impose endless conditions on small borrowers, leaving them struggling to qualify. As a result, small clients remain deprived of formal credit. Although 1.17 crore enterprises are listed under BSCIC in CMSME sector, their total outstanding loans stand at Tk 2.98 lakh crore, representing only 16 percent of total loans.
According to BB, by the end of December 2025, the number of certificate cases filed against farmers and small borrowers reached 1,01,123, involving defaulted loans of Tk 393 crore. In stark contrast, loans concentrated among just 11 industrial groups in the banking sector totaled nearly Tk 3 lakh crore.
SME Foundation data from August revealed that among the 1.17 crore CMSME entrepreneurs, nearly 77 percent remain outside formal banking channels. Only 9 percent receive direct bank credit, while 14 percent secure loans through microfinance institutions.
Instances of harassment faced by small borrowers
In Bharaimari village of Ishwardi, Pabna, a female entrepreneur named Rahima Begum took a loan of Tk 40,000 in 2016 and repaid Tk 45,000 including interest. However, due to an unpaid balance of just Tk 900 during the COVID-19 pandemic, a case was filed against her in 2021, resulting in her imprisonment over the default case.
Atiar Rahman, a local farmer from the same village, expressed his distress, saying, “Do we not have any self-respect? They tied a rope around my waist for an unpaid balance of Tk 400. I had to serve time in jail. Everyone thought I must have embezzled huge amounts of money. I cannot even show my face in the village.”
Majnu Pramanik from the same village shared, “I paid Tk 15,000 in interest on Tk 40,000. Even then, I went to jail. What kind of rule is this, I do not understand. We want justice for this harassment.”
