Trends and Challenges of Formal Agricultural Credit in Bangladesh: Enhancing Productivity and Promoting Inclusive Growth

Abstract

Empirical studies provide evidence that agricultural finance is crucial for agriculture structural development of an economy. Ensuring the productivity of the agricultural sector is crucially important for the timely availability of agricultural credit. The purpose of this study is to look at what is going on with agricultural credit, especially in the formal sector of banking. Throughout the years, there has been a significant increase in credit disbursed through the official sector, which includes commercial banks and other financial institutions. This is a significant development, as in the past the informal sector was dominant. Non-Governmental Organizations (NGOs), private commercial banks in the area, and foreign banks have all played a role in the provision of agricultural credit to farmers throughout the country. However, despite the increasing flow of credit from formal sector institutions, some challenges need to be addressed. Accessibility remains a concern, particularly for small and marginalized farmers who struggle to access formal credit channels. For formal agricultural credit to have a positive impact, it is necessary to ensure its widespread availability, to provide financial products that are tailored to the needs of farmers, and to implement policies that reduce inefficiency and leakages in the distribution of credit. By addressing these challenges, formal agricultural credit can play a pivotal role in enhancing agricultural productivity, empowering farmers, and driving sustainable economic growth in Bangladesh.