Bangladesh will come to a halt if loan defaulters are put in jail: Finance minister

AHM Mustafa Kamal wants to bring reforms to the banking sector to save the businesses that have unwillingly defaulted on loan repayments because of the highs and lows of doing business.

“The country won’t be functioning if all the businessmen are sent to jail for default loans,” the finance minister said in a pre-budget discussion in Dhaka on Thursday. 

Kamal had vowed to bring down the amount of default loans when he took charge about four months ago. 

Many were then given some opportunities to renounce the loan defaulter tag.

Measures were also taken to make the mounting default debt issue look less bad than what it is now by relaxing the policy for loan write-off.

The finance minister shared his thoughts on the issue again in the discussion with representatives of NGOs, print and electronic media editors, and Economic Reporters Forum ahead of the 2019-20 national budget.

“There are chances of earnings when someone does business, but you can’t rule out possibilities of losses. And nothing has been kept for those who suffer losses,” he said.

“The banking sector is in a terrible state. There is no way out if anyone takes loan once,” the finance minister said.

The government was taking measures like passage of the Bankruptcy Act by the UK in 1869 to free loan defaulters from jail, he said.

Before the passage of the Act, half of the 20,000 people in jails of England and Wales were loan defaulters, according to the minister.   

“But we don’t have any Insolvency Act, system of arbitration, or Bankruptcy Act now. England passed the Insolvency Act to free those in jail. We are also taking some similar measures,” Kamal said.      

He would take the measures for “good” entrepreneurs who have become loan defaulters. “We want to make some reforms in the banking sector.”

Kamal said he believes cutting interest rates will help decrease default loan rates besides boosting industrialisation.

“No country charges 17 to 18 percent interest. No industry can survive paying this much interest. Interest rates must be brought down. These will be based on the market and no-one will become loan defaulters,” he said.

The finance minister urged investors not to bet whimsically on stocks. “You should make a long-term plan if you want to enter the market,” he said. 

To boost revenue, he said he was planning to widen the range of taxes instead of raising rates.

Professor Abdullah Abu Sayeed of the Bishwo Shahitto Kendro urged the minister to keep measures to ease traffic congestion in Dhaka and free the city’s playgrounds from encroachment.

The prime minister’s media adviser and Editor of The Daily Observer Iqbal Sobhan Chowdhury, Prothom Alo Editor Matiur Rahman, Manabzamin Editor Matiur Rahman Chowdhury, Bangladesh Pratidin Editor Naem Nizam, Campaign for Popular Education Executive Director Rasheda K Chowdhury, SHUJAN Secretary Badiul Alam Majumdar, Mohila Parishad’s Maleka Banu, and USAID’s Farah Kabir, among others, joined the discussion moderated by Finance Secretary Abdur Rouf Talukder.

Naem advised making the revenue collection system more efficient.

“An entrepreneur pays income tax less than what a journalist does in many cases. Howe is it possible!” he said.           

Prothom Alo’s Matiur proposed a cut in duty to import newsprint papers. 

Iqbal emphasised measures to bring back the people’s confidence in banks and the stock market.

Rasheda said the Islamist preachers who ride helicopters to religious programmes like Waz-Mahfil must be taxed.

Badiul put stress on reducing corruption in the financial sector.