Bank credit to transport sector grows to new high

Transport and communication sector recorded the highest growth in receiving banks' advances (loans) in fiscal year (FY) 2007-08, according to a Bangladesh Bank (BB) report.
Total advances of the scheduled banks stood at Tk 181,550 crore at the end of June 2008, which was 23.9 percent higher than the total advances of Tk 146,570 crore in FY 2006-07.
Of the total advances, the transport and communication sector recorded the highest growth at 37.6 percent, followed by trade sector at 31.7 percent, industry 22.4 percent, working capital financing 15.2 percent, agriculture, fishing and forestry 12.2 percent, construction 11 percent and other sectors at 32.6 percent in FY08, compared to the previous fiscal's.
The transport and communication sector received Tk 3,950 crore or 2.2 percent of the total credit given in FY2007-08. Credit provided to this sector was Tk 2,870 crore in 2006-07 and Tk 1,960 crore in 2005-06.
“In recent years, significant changes took place in the trends in total bank advances classified by economic purpose,” the BB report mentioned.
“Banks opened a good number of letter of credits (L/Cs) for the import of transport and communication goods in 2008,” said Helal Ahmed Chowdhury, managing director of Pubali Bank.
He said tremendous development in road network across the country has created a rapid rise in the demand for transport and communication goods, especially buses, trucks and cars.
Dhaka's public bus routes rose to around 150 earlier this year, showing an increasing trend of motor transport in the capital. There were around 12 bus routes 10 years ago, and 63 bus routes in 2005, said Bangladesh Road Transport Authority (BRTA) officials.
According to BRTA, some 5,000 private buses currently ply city roads and the number is increasing everyday. Officials said more buses are needed, as most busses in the city are overcrowded, particularly in the morning and evening.
According to bankers, new buses are landing on roads everyday in other big cities, such as Chittagong, Sylhet, Khulna and Rajshahi.
“Banks are giving increasing credit to the transport and communication sector because their recovery rate is very good,” Helal Ahmed Chowdhuury said. “If the bus is insured, the risk for the creditors comes down significantly,” he added.