Loan growth in the country’s cottage, micro, small and medium enterprise (CMSME) sector has stalled. In the January-March quarter of 2026, total outstanding loans in the sector fell 5.15% from the previous quarter to Tk 2,98,088.83 crore (about Tk 2.98 trillion). At the same time, the default-loan rate rose alarmingly, from 24.03% in the previous quarter to 26.04%. As a result, banks and financial institutions remain far behind Bangladesh Bank’s CMSME lending targets. The figures come from a Bangladesh Bank report.
Those connected to the sector said: “The CMSME sector is one of the main drivers of employment and production. But the high rate of default loans is discouraging banks from disbursing new loans. It is not enough merely to increase refinancing funds; loan governance and recovery capacity must be improved.”
According to the central bank report, at the end of March, CMSME lending was only 15.87% of the country’s total loans, against the regulator’s target of 25.50% — leaving the banking sector nearly 10 percentage points behind target.
Rising default pressure
The report said the classified or default-loan rate on CMSME loans rose 2.01 percentage points in a single quarter. Over the same period, the overall banking sector’s default rate also rose, reaching 32.26%. This makes clear that pressure on recovering loans to small and medium entrepreneurs is rising and that banks’ risk is increasing. Bangladesh Bank said strengthening recovery, effective monitoring and sustaining disbursement were now the biggest challenges.
Disbursement up, but outstanding loans down
According to the report, Tk 52,107.72 crore was disbursed among 3,86,453 firms in the January-March quarter. Compared with the same period a year earlier, the volume of disbursement rose 8.98% and the number of firms financed rose 19.37%. But total outstanding loans fell over the same period, reflecting loan repayments, classification and the slow pace of new lending.
More than half the market held by private banks
The largest share of CMSME loans is still held by private commercial banks, at 51.95% of total outstanding loans. Islamic banks hold 20.08% and state-owned commercial banks 18.88%.
By contrast, finance companies have the highest ratio of CMSME loans to total loans, at 22.70%, followed by specialised banks at 21.19%. Foreign banks have the lowest ratio, just 7.30%.
BRAC Bank on top
In the first quarter of this year, BRAC Bank led CMSME disbursement, lending Tk 7,456.44 crore on its own. It was followed by Pubali Bank, City Bank, Islami Bank Bangladesh and Al-Arafah Islami Bank. The five banks together accounted for about 40% of total disbursement.
Over-reliance on the trade sector
A sector-wise analysis shows 44.93% of total CMSME loans went to the trade sector, although the regulatory cap is a maximum of 40%. The manufacturing sector’s share was 34.96%, below the set minimum of 40%. The service sector’s share was 20.11%, meeting Bangladesh Bank’s target.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report