Debt-based money creation is the process by which commercial banks create new money when they issue loans. Contrary to popular belief, banks don't simply lend out money that depositors have saved — they actually create brand new digital money every time they approve a loan.
When a bank approves a loan — say a home loan or business loan — it credits the borrower's account with the loan amount. At that very moment, new digital money is created. The bank records the loan as an asset (money owed to the bank) and the new deposit as a liability (money the bank owes to the borrower). This double-entry bookkeeping is how new money enters the economy.
In Bangladesh, commercial banks create money through lending just like banks everywhere else. When an entrepreneur takes a loan to expand their business, that loan amount is credited to their account and new liquidity is added to the economy.
This process is influenced by central bank monetary policy — Bangladesh Bank sets interest rates and reserve requirements that indirectly control how much lending commercial banks can do. Because of debt-based money creation, there's a tight link between total debt and money supply in the economy.