Global Journal of Management and Business Research, B: Economics and Commerce, Volume 21 Issue 5

Contribution of Banks on Agricultural Development in Bangladesh Ratna Khatun Abstract- Most of the cases, the determinants of agricultural development are crops, purchase and installation of irrigation equipment, livestock, marketing of agricultural goods fisheries, poverty alleviation and income generating activities. Banks also disburse loan on each of these sectors. So banks plays an important role on agricultural development in Bangladesh. Timely and adequate flow of agricultural credit can meet farmers demand to enhance agricultural productivity. The aim of this paper is to determine the contribution of banks on agricultural development in Bangladesh. This study collected time series data from various sources and analyze the contribution of agricultural credit of banks in Bangladesh. Keywords: agriculture, agricultural credit, agricultural development, bangladesh . I. I ntroduction angladesh gained independence in 1971. Since it’s independence agriculture has been the core sector of Bangladesh economy. According to the 1981 census, 83 percent of the labour force are employed in rural areas; 61 percent in agricultural activities. Bangladesh is an agrarian country where agricultural sector plays vital role in accelerating the economic growth by providing inputs to agro-based industries, creating employment, attracting foreign direct investment. Many factors such as soil, climate, seed quality, fertilizer, irrigation, household, characteristics, rural infrastructure, labour efficiency, managerial capability, use of modern technologies etc influence the productivity of agriculture. In that case timely and adequate flow of agricultural credit can meet farmers demand to ensure agricultural productivity. It can increase quality and quantity of input used in the production process. Bangladesh is a developing country where the banking system plays a vital role in the progress of its economic development. As mentioned earlier that Bangladesh is an agrarian country, the economic growth will be slowed down if the finance is not provided to the agricultural sector. Keeping this in mind, for the development of agricultural sector the Government of Bangladesh has established two specialized banks namely; Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB). These banks are continuously working for the development of agricultural sector; Firstly , they are trying to promote saving among middle and lower middle class of urban and rural areas. Secondly, these banks increase investment in different sectors of agriculture, industry, trade. These banks also provide micro-credit which will help the disadvantaged people to become self sufficient. Day by day both public, private and foreign commercial banks are incorporated under agricultural credit program. Specialized and commercial government bank as well as NGO& MFIs have their decentralized branch network system in remote areas throughout the country. These formal sectors provide agricultural credit to the poor farmers in the rural areas (small, marginal and landless farmers) so that farmers can purchase agricultural input timely which help to stimulate food production and improve the livelihoods of poor farmers. Agricultural credit plays an inevitable role in agricultural productivity. The contribution of agriculture sector to the GDP in FY 2019-20 is 13.35 percent (Bangladesh Economic Review 2020). According to the Labour Force Survey 2016-17, 40.62 percent of the total labour force of the country is engaged in agriculture. It also makes a significant contribution to the growth of the service sector. In addition, we cannot deny the role of agriculture in ensuring food security for a growing population from the declining arable land as well as the impact of climate change. II. R eview of L iterature Akther, M., Younus, D.S., Parveen, F. and Chowdhury, M.M.I.(2016) in their study try to examine whether rural financing played any role in reducing rural poverty and thus increased sustainable economic development in Bangladesh. They tried to identify the determinants of rural poverty in Bangladesh using priority sector lending such as agricultural sector credit, rural employment, female employment, agricultural production and credit to gross domestic product and per capita income as independent variables. The empirical estimation for the sample period from 1984 to 2014 suggests that all the explanatory variables in the model are significant and are found to be negatively related to rural poverty. The elasticity of the rural poverty with respect to priority sector lending is -0.27 implying that a one percent increase in priority sector lending will reduce rural poverty by 0.27 percent on average. B © 2021 Global Journals 73 Global Journal of Management and Business Research Volume XXI Issue V Version I Year 2021 ( ) B Author: Ratna Khatun, Assistant Director, Research Department, Bangladesh Bank, Central Bank of Bangladesh, Bangladesh. e-mail: ratna.khatun@bb.org.bd