Average loans by households nearly double in 6 years: BBS

An increasing number of families are becoming connected with the formal financial system by depositing and borrowing money, according to the Bangladesh Bureau of Statistics (BBS). 

For instance, the ratio of households with at least one member having a bank account doubled to 14.12 per cent in 2022 from 7.5 per cent six years ago.

And more than one-fifth of families had deposits in micro or financial institutions as of 2022. The ratio was 15.09 per cent in 2016, according to the latest Household Income and Expenditure Survey 2022 (HIES) of the BBS.

When it comes to borrowing, the ratio of households who received loans from financial institutions or friends rose to 37.03 per cent in 2022 from 29.7 per cent six years ago.

And the average amount of loans taken by the households nearly doubled from that in the year 2016. In 2022, an average family had loans amounting to Tk 70,506, up more than 86 per cent from 2016.

An official of the BBS and an economist said the families borrowed the money to meet multiple needs and the amount of the debt is not high in view of the average monthly income of households recorded in 2022.

"People usually borrowed money with a view to meeting their multiple needs like educational expenses, medical healthcare services, business purpose as well as recovering from the post Covid-19 situation," said Mohiuddin Ahmed, project director of the HIES-2022.

Besides, Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, gave credit for the higher financial inclusion to various aspects, including expansion of agent banking, mobile financial services (MFS) and higher rural migrations.

"Along with microcredit financing, there are many simultaneous interventions that are accelerating financial inclusion in the rural areas," he said.

The countryside is getting a huge number of agents banking outlets, enabling small and medium enterprises to conduct banking in the rural areas, he said.

In the latest HIES-2022 findings, 21.04 per cent households in rural areas had money deposited with micro or financial institutions in 2022 whereas it was 17.30 per cent in 2016.

In urban household, it had increased from 21.85 per cent to 12.20 per cent.

The rural consumers will be benefited in terms of the access to credit as well as access to funds, if this process of financial inclusion continues in future, said Mansur.

The nano loans will be very competitive in future in Bangladesh, he said.

However, Mansur said although the average loan per household has somewhat increased, it was going to be almost compatible with the household income.

"The average annual per household loan is still manageable. It has not become a huge burden yet," he said.

The average monthly household income rose to Tk 32,422 in 2022, up more than 102 per cent from that in 2016, according to the latest HIES key findings.

The economist also saw a competitive market in the rural areas in future arising between the micro-finance institutions (MFIs) and modern financial institutions.

Usually, microcredit institutions used to charge high interest, which they might not continue to do as agent banking outlets are available now.

They have to sustain by competing with the banks or mobile financial institutions or have to drop out from the market, he said.