Staff Correspondent:

A new study published in Nature Portfolio highlights that increased access to credit significantly promotes rural transformation in Bangladesh by enhancing agricultural production and non-farm employment opportunities.

The research, conducted by Subrata Saha, Mohammad Jahangir Alam, Al Amin Al Abbasi, Ismat Ara Begum, Maria Fay Rola Rubzen, Panam Parikh and Andrew M. McKenzie, analysed three waves (2005, 2010, and 2016) of district-level data from Bangladesh Household Income and Expenditure Survey (HIES) conducted by the Bangladesh Bureau of Statistics (BBS). A total of 192 district-level observations of credit and control variables, namely access to education, per capita land, and access to electricity, from the rural areas of all 64 districts in Bangladesh are used.

The findings reveal that credit availability plays a crucial role in shifting rural economies from traditional farming towards high-value agricultural products like vegetables, fruits, and livestock.

Access to credit is the extent to which rural households can obtain financial resources from formal financial institutions or other sources, such as microfinance institutions. It is a key indicator of financial inclusion and highlights the availability and affordability of credit in rural areas.

According to the study, credit not only boosts agricultural output but also expands rural non-agricultural employment, contributing to economic diversification. The researchers emphasized that improving access to credit, along with education and electricity, is essential for achieving sustainable rural transformation.

The data demonstrates that mean credit disbursements per household increased with time, from Tk12,116 in 2005 to Tk27,616 in 2016. This suggests that more households were able to secure higher amounts of credit for various uses, such as investments in the non-agricultural sector, purchases of agricultural inputs, or managing financial needs.

The increase from about 26.2% in 2005 to 35.8% in 2016 signifies possible improved opportunities for households to fulfill their financial needs for various purposes, such as investment in agriculture, business ventures, and education.

The share of high-value agricultural products, such as fisheries, livestock, vegetables, and fruits, rose from 09.9% in 2005 to 16.6% in 2016.

The same Increasing trend has been seen in China, where the share of high-value agriculture of total agriculture’s output value has grown from 16.6% in 1978 to 36.8% in 2019 (Huang and Shi, 2020).

Similar increases were also seen in access to electricity, education, and per capita land availability between 2005 and 2016. Regions with higher electricity accessibility attract investments, promote small and microenterprises growth, facilitate social development, and improve the overall quality of life, reads the report. Education access results in a more educated and skilled workforce, contributing to better livelihoods in rural communities. Enhancing skills, productivity, and entrepreneurship in Bangladesh is possible through education-centered workforce development, the research found.

Despite the positive impacts, the study highlights that many rural households still face barriers in accessing financial resources, hindering their economic progress.

The authors recommend that policymakers focus on increasing credit accessibility, enhancing financial literacy programs, and developing institutional capacity to accelerate rural transformation in Bangladesh.

This groundbreaking study is expected to guide future policies aimed at fostering inclusive economic growth in rural areas.