LOAN & INTEREST
A research paper written on
the Impact of Loans and Interest on Society
by Tawfique Alif
Abstract
It's been a major issue since the very beginning of Bangladesh’s inflation. Inflation lies on
a number of reasons Loan is one of them lets see how loan affects Bangladesh's economy. This
paper is about loans and interests how they are relatable how they contribute to our economy
as a curse. In this 21st century loans have a special place in economics since it’s a part of
the banking system it's considered legal but Islamic and some other religions don’t consider
it as any legal act, and why?
Introduction
What are the fundamental rights for people to live a simple life? Well, its answer relies on
individuals since according to people the meaning of life has its own meanings it varies from
person to person. Taking loans never was a part of society after the revolution of the banking
system taking loans is more accessible and the banking sector encourages to take loans from
time to time this sector has gained new strategies to make people rely on them. Now in this
21st century banking system controls the finances of the world. After being damaged several
times Bangladesh's banking system is now on the verge of an extreme challenge according to
Daily Star its external debt increased to $103 billion at the end of June this year after
falling slightly in March (Reference: The Daily Star September 19th 2024). this is raising
concern about Bangladesh's future economic stability among the people and world leaders. Still
people are taking loans but why?
Basic Needs and Loan Dependency
Three of The six fundamental human needs are food, shelter, and healthcare. According to a
report by Business Bangladesh, 1/4th of the people in Bangladesh rely on loans to meet their
essential needs. The data presents that:
28% of rural populations,
24% of urban residents, and
15% of city corporation residents are
depending on loans.
Percentage of people indulge in loan
city corporations city Village others
This dependency indicates systemic economic challenges rather than merely individual financial
mismanagement.
Economic Scandals and Their Impact
The 2012 hallmark-Sonali bank scam and the 2013 Bismillah group loan scam, are one of the
biggest corruption in Bangladesh's history. Massive defaults have resulted from these schemes.
In Bangladesh, defaulted loans were Tk 2,11,391 crore as of June 2024, representing 12.56% of all loans (Source: The
Daily Star, September 4th, 2024). A tiny number of people's corruption fuels inflation, which impacts
the entire nation. Now 100tk today holds a purchasing power equal to 65tk compared to two
years ago. So the inflation rate here is 35%. This is how loans affect the economy by
increasing inflation.
Microloans and the Loan Trap
Microloans are often promoted as tools for financial inclusion and have become a double-edged
sword for low-income people. Low-income people must rely on microloans to survive due to
rising inflation, yet exorbitant interest rates frequently cause them to spiral farther into
debt. An analysis of the unfortunate experience of Sonia Akter:
"Sonia Akter obtained a microloan from Grameen Bank for just Tk 80,000. She had to borrow from
more institutions to repay the installments. Sonia Akhtar of Srinagar in Munshiganj now has a
debt burden of Tk 30 lakh. Not only Sonia, but many people are falling into the trap of
microcredit. Some even choose the path of suicide” (Source: Ekattor.tv 27th February 2024).
Commodity Fetishism and Consumer Loans
A large number of people specifically the gen-z are now indulging in "Commodity fetishism"
exacerbating the loan problem. If we simplify then Commodity fetishism is a behavior where a
person urges to look majestic or reputable in society using his power money or other assets.
Bank uses this as an opportunity to offer people loans:
Car loans,
Home loans,
Education loans, and
Credit cards.
Credit cards, in particular, serve as "loan machines," offering users various amounts of
discounts but ultimately locking them into high-interest repayments.
Findings
1. Systemic Issues: Individuals or groups of people are engaging in loan defaults and money
laundering disproportionately affects the whole population.
2. Inflation: The government failure to stop corrupted people and their loan-taking action
leads to the ultimate result of inflation by printing more money and creating a disbalance
between commodities and purchase powers of individual
3. Loan Accessibility: Microloans are making people fall for their trap and charging a higher
amount of interest while they increase the percentage every month people end up losing
everything eventually
Conclusion
The research highlights that loans, while necessary for economic development, have become a
tool for exploitation in a capitalist framework. Individuals are burdened by microloans and
consumer loans, and institutional corruption makes inflation and national debt worse. To
lessen these problems, financial regulations must be reevaluated, and the banking industry
must be held to higher standards of accountability. Loans will continue to be a burden rather
than a benefit for the people of Bangladesh unless there is systemic change.
References
1. Kaler Kantho 5th April
th
2. Business Bangladesh 24 March 2024
3. The Daily Star September 4th, 2024
4. Ekattor.tv 27th February 2024
