Single-digit interest comes to the aid of industries

The single-digit interest rate on bank loans has helped industries in Bangladesh tremendously as the cost of finances has gone down sharply, allowing them to navigate challenges during the coronavirus pandemic smoothly, said a top entrepreneur.

Aameir Alihussain, managing director of BSRM, the largest steel maker in the country, says they are delighted because of the single-digit interest rate.

"Hadn't the rate been brought to single-digit, the impact would have been far deeper in terms of cost. It helped us in that context."

"If the government ensures this level of cost of finances, it will be helpful for all industries," he told The Daily Star in a phone interview yesterday.

A lower interest rate environment will also boost investment, according to Alihussain. "Had the cost of finances been high, many projects would have been unviable."

"The cost of funds has gone down significantly. We are savings crores of taka every year."

Before the single-digit interest rate was put in place in April 2020, the cost of funds averaged 12 per cent. For the good clients of banks, it is now much below 9 per cent.

Alihussain says the government's stimulus packages are also supporting industries. "It was a timely move on the part of the government."

He says the price of scrap, the main raw material for steel products, has increased further in the past week along with all other ingredients needed to produce steel products.

Globally, raw material prices have risen owing to persisting supply chain disruption, unprecedented shipping cost and demand recovery.

"But we have been slowly raising the price of the products in the local market. And the prices have not risen in proportion to the global market prices," Alihussain said.

"Prices have to be increased further in the coming days," he said, adding that the prices should go up by about Tk 4,000 to Tk 5,000 per tonne.

"Prices will go up ultimately. But we want to keep the increase in prices reasonable because any spike affects everyone. This is because everyone has a budget, whether it be for building a factory or house. If the price jumps suddenly, it affects their spending plan."

BSRM has been trying to improve efficiency for the last year and has cut the cost of production. "The cost-cutting does not mean that we will lay off workers though," Alihussain said.

The steel maker has been able to cut costs in the case of power and gas consumption by enhancing operational efficiency. This has helped it lower per tonne power and gas consumption.

The company has also paid attention to the proper maintenance so that no machines fail as part of the efficiency drive throughout the organisation, he said.