Increasing Boro rice productivity through credit: Evidence from Bangladesh

Abstract

Rice productivity needs to be increased to feed Bangladesh’s growing population. Productivity can be increased by adopting improved varieties and management practices, which require additional capital inputs. In this article, we aim to estimate the effect of formal and semiformal credit on rice productivity in Bangladesh. We surveyed 500 rice farmers to achieve these objectives. We used descriptive statistics, propensity score matching and Heckman’s endogenous treatment effect model to analyse the data. The findings indicate that literacy, television ownership and training positively influenced access to formal credit. In general, credit recipients achieved higher productivity than did non-recipients. In the situation of credit source-specific effect, we found mixed results. Given the estimated difference of 438 kg/ha to 495 kg/ha, the results indicated that formal credit recipients had significantly higher productivity than did formal credit non-recipients. In contrast, endogenous treatment effect model results suggested that both formal and semiformal sources of credit had a significant effect on rice productivity. Increased agricultural loan disbursement through formal and semiformal credit institutions is strongly advocated. Farmers’ decision-making abilities regarding the most effective source of credit can be improved through training in financial literacy. The central bank of Ban-gladesh, along with the credit regulatory authorities of non-governmental organisations, can implement appropriate agricultural credit programmes for farmers.