Bangladesh's poor farmers are yet to be blessed by adequate bank credit. On many a ground, bank financing is preferable for our resource-constrained farmers. Small farmers borrow from several sources , but have little access to bank financing while our central bank has given priority to financing agriculture and rural economy through its extensive policies and programmes since long. Have we so far been able to raise the farmers' investment capacity or loan repayment ability? Has there been any empirical study in this regard? Is it pragmatic to formulate and implement financing policies or programmes year after years without any empirical study based on sound methodology?
Can the poor farmers constituting 92 per cent of total farm households (landless, sharecroppers, marginal, small-sized farming community) generate income enough to repay loan after meeting family expenses? Lenders (be they banks or NGOs) or any other credit agency ) would argue that borrowing farmers earn more income than the borrowed money including cost of fund, and are thus able to repay the loan dues. Such attitude of lenders towards farming borrowers' capacity to repay loan is apparently right , but an insight into the issue unveils some unique features and facets that really matter a lot for financing small farmers. The ongoing discourse aims to examine the farmers' loan repayment capacity from a different perspective over which lenders have never pondered. Farmers' indebtedness is on the rise and the reliability of agricultural credit recovery statistics reported by Bangladesh Bank becomes questionable.
Let us first embark upon the status of poor farmers' income, expenditure, and surplus. Table 1 shows that about 95 per cent of farmers belong to the group of landless to 149 decimals of land. Landless farmers engage in sharecropping , wage-labour, and in non-farm activities and as such they can have an annual surplus of Tk.14000 per year. Farmers owning land from less than 5 decimals to 49 decimals have to incur deficits amounting to Tk 13000 to 32000 on an average per year. Small farmers owning land of 50 to less than 250 decimals have a surplus of Tk.16000 to 31000 per year.
It is thus observed that farmers belong to both surplus and deficit categories. It is to be noted that expenditure does not include investment spending in farm/non-farm activities. In crude sense, the level of surplus is not significant as there must be provision for contingencies. It may, therefore, be deduced that our landless and small farmers are not able to invest in agricultural or non-farm activities from own fund. They are totally dependent on debt financing. Most of the farmers lack the capacity to invest in agriculture (recognised in Bangladesh Bank's Agricultural /Rural Credit Policy and Programme for FY 2010-11).That incapacity still exists as admitted in the said Policy and Programme for FY 2024-25 ( which tells that marginal, small farmers and sharecroppers have no adequate investible surplus ).
Independent research such as the survey of Power and Participation Research Centre (PPRC) finds that eighty per cent of families in the country cannot cover household expenses as their monthly expenditure exceeds their income. According to the PPRC study, the bottom 40 per cent of families in terms of population has an average monthly income of Tk 14,881, while their average monthly expenditure is Tk 17,387. The middle 40 per cent of families have an average monthly income of Tk 28,818, but their household expenditure stands at Tk 29,727. As a result, they have to rely on loans to run their households.
BB prepares and implements Agricultural/Rural Credit Policy and Programme every fiscal year. 15 years' agricultural credit statistics of Bangladesh Bank are presented in Table 2. The table shows that disbursement of agricultural credit by scheduled banks has been on the gradual increase every year. Undoubtedly, it is a good sign but recovery from poor farmers is an enigmatic phenomenon.
As almost all farmers are at the subsistence level of income generation , they are unable to repay their loan dues. The question is : How they repay? Amount of recovery by farmers practically flows from the amount disbursed. As a result, net disbursements significantly declined, even became negative in 8 years out of 15 years' time span. Unfortunately, bank financing failed to bring about adequate flow of credit to farmers. They are forced to resort to informal financing at a higher cost of fund. They are indeed in a precarious condition. Covid impacts extensively worsened their livelihood. HIES 2022 also disclosed that every household has a loan of Tk.44111 which was Tk 31332 in survey period of 2016.
Table 3 hints that our bank financing covers only 18 -23 per cent of total farm households. Access rate is very poor. Goss disbursement figures are apparently handsome but as recovery is disbursement-borne due to farmers' financial capacity, net flow of credit to farmers is almost negative and extremely alarming.
Do we as lenders or policy makers ever think of credit adequacy in terms of net flow and farmers' need for multi-purpose investment to generate repayment capacity in real sense ? We have no steps on how to ensure ever-growing rate of poor famers' access to bank finance so that every farm household may be able to generate income to meet both family expenditure and debt fund with costs.
Research should be undertaken to investigate small farmers' needs for farm and non-farm activities (or any suitable combination of economic activities including agriculture), income generation, family expenditure, repayment capacity, sources of fund invested, cost of fund ,etc of each category of poor farmers based on ownership of land or no land, sharecropping status and so on. Only then we can customise our policy and programme on financing.
Expanding access to, and confirming adequacy of bank credit are essential to raise farmers' surplus over their family expenses as farm and family of small farmers are indivisible. If lenders or policy makers fail to realise and recognise this indivisibility, farm loan recovery from poor farmers, and ensuring farmers' financial viability would just be an unrealisable dream. Henceforth, lending approach and strategy need a shift from the present one.
Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired
Professor of Management. sarkerh1958@gmail.com
© 2025 - All Rights with The Financial Express
