Q2 number of NBFCs' borrowers falls

The number of individual borrowers of non-bank financial companies (NBFCs) declined by more than 1.0 per cent in the April-June quarter (Q2) of 2025.

Such a fall has been attributed to the sector's prolonged struggles amid a slowdown in private investment and weakening loan demand.

According to Bangladesh Bank data, the number of NBFCs' borrowers reached 119,995 at the end of June, down 1.13 per cent from 121,310 in the previous quarter.

The number of loan accounts with the NBFCs also dropped by 2.0 per cent to reach 204,965 as of June last.

Figures show that the number of male borrowers declined by 2.24 per cent, while that of women borrowers surprisingly rose by 5.64 per cent, which reflected a marginal but notable increase in women's participation in borrowing.

The sector insiders said the contraction was linked to both demand-and supply-side pressures.

"The overall financial sector has been under stress as private investment slowed significantly, reducing the demand for credit. At the same time, deposit mobilisation also dropped, restricting NBFCs' capacity to lend," one senior executive told the FE.

Md Kyser Hamid, Managing Director and CEO of Bangladesh Finance, said the situation worsened after the Bangladesh Bank (BB) had published a list of 20 "red-category" NBFCs.

"There was a panic withdrawal after the release of the list. Depositors pulled out their funds. And once deposits shrink, lending naturally suffers," he said.

Mr. Hamid said after the quarter ending in June last, the NBFCs were seeing signs of some improvements.

"We will sit with the central bank to discuss the situation, and I believe many NBFCs will rebound soon," he added.

The central bank placed 20 NBFCs in the "red" category as their loan exposures exceeded three times the value of their collateral. Such a situation raised questions about the sector's risk management and governance practices.

Over the past several years, NBFCs' delayed repayments or defaults forced the frustrated depositors to stage protests on multiple occasions, demanding their money back.

Analysts say the crisis in NBFCs is partly a reflection of weaknesses in the broader financial sector, where 'fragile governance' and mounting non-performing loans have eroded confidence.

"While banking sector's troubles often grab news headlines, the challenges in NBFCs are equally serious because they play a crucial role in providing alternative financing for businesses and individuals," another CEO of an NBFC told the FE wishing anonymity.

"A prolonged crisis in this sector could further dampen investment sentiment," he cautioned.

NBFCs, which were formerly called NBFIs, are traditionally considered as an alternative to commercial banks and they are licensed to provide loans, leasing, and investment opportunities with permission to accept demand deposits.

Although NBFCs share a fraction of the country's financial operations, their health is viewed as vital for fostering private sector credit growth, especially in small and medium enterprises.

jasimharoon@yahoo.com