A revised agro-rural credit policy announced by Bangladesh Bank has failed to win the confidence of farmers, many of whom are struggling under the weight of recurring natural disasters, inflation, and mounting debt.
The annual update to the policy included nine changes or additions, but critics say none address the core challenges facing the country’s farming community – particularly inadequate loan allocations, high interest rates, and the persistent failure of credit to reach small and marginal farmers.
Farmers across the country continue to complain about the burden of agricultural loans, with interest rates ranging between 5% and 8% – a significant strain given that crop prices often fail to cover production costs, let alone repayments.
For years, many of Bangladesh’s largely subsistence-based farmers have been forced to turn to microfinance institutions or informal moneylenders to survive after crop failures, floods, or price crashes. This has trapped them in a relentless cycle of debt, with little relief in sight.
The latest credit policy offers no concrete measures to break this cycle. While the total loan disbursement target for FY2025-26 has been raised to Tk 39,000 crore – Tk 1,000 crore more than the previous year—farmers and experts question whether the funds will actually reach those most in need.
“Agricultural loans have become a burden, not a support,” said Abu Bakar Siddique, an agro-entrepreneur from Mymensingh. “Even after jumping through hoops to secure a loan from a private bank, repayment often forces us to sell off farmland. Interest rates start low but rise over time. When crops fail or fish farms flood, repaying becomes impossible.”
Abu Bakar’s situation is not unique. After missing five consecutive instalments on a Tk 12 lakh loan, he recently received a legal notice from a private bank threatening criminal proceedings unless he clears his dues.
“We barely recover our production costs when we sell our crops,” added Samsuddin, another farmer from Mymensingh. “How can we repay high-interest loans on top of that?”
Faced with such financial pressure, many farmers are abandoning agriculture altogether. Some use agricultural loans to set up small retail shops or invest in non-farm ventures. In Bakerganj upazila of Barishal, several farmers admitted they took out loans for farming but used the money to trade land or start petty businesses.
Longstanding demands for interest-free loans remain unmet. While Bangladesh Bank mandates a concessional 4% interest rate for certain import-substitute crops, most agricultural loans still carry rates of 5-8%, with some even higher depending on the lender.
Abdul Bayes, agricultural economist and former vice-chancellor of Jahangirnagar University, cautioned against a blanket interest-free policy, warning it could lead to misallocation of funds. “Banks have operational costs,” he said. “While interest rates must be farmer-friendly, the government should focus on targeted subsidies, extended grace periods, and repayment relief—especially in disaster-affected areas.”
He recommended allowing farmers up to 12 months to repay loans after crop losses, without facing legal action.
Private banks, meanwhile, admit they lack the rural infrastructure to effectively monitor agricultural lending. Most do not have branches at the upazila or union level, making it difficult for small farmers to access credit without travelling long distances.
Under the crop hypothecation policy, marginal farmers with 0.49 to 2.47 acres of land can use their harvest as collateral. But many private banks remain reluctant to lend under this scheme, citing difficulties in recovering dues from crop sales – especially when prices plummet during harvest season due to lack of storage facilities.
“The policy says nothing about helping farmers store their produce,” said Ripon Kumar Mondal, Professor of Agricultural Economics at Sher-e-Bangla Agricultural University. “Without storage, farmers are forced to sell at throwaway prices or dump surplus crops.”
He also noted that many farmers are unaware of loan terms or application procedures, pushing them toward NGOs or specialised banks instead.
Anisuddin Ahmed Khan, independent director of Trust Bank, acknowledged that private banks often rely on reputable NGOs, rated by the Credit and Development Forum (CDF), to disburse agricultural loans on their behalf due to limited field capacity.
Despite the challenges, private banks report a high recovery rate, around 95%, on agricultural loans, though critics argue this reflects selective lending to relatively better-off farmers rather than support for the most vulnerable.
Key changes in the new policy
Among the new measures in the revised policy:
- Inclusion of Prabashi Kallyan Bank in the farm loan programme.
- Mandatory Credit Information Bureau (CIB) reports for all agricultural and rural loans.
- Simplified charge documentation for loans up to Tk 300,000 in fisheries and livestock.
- Increase in livestock sector loan allocation from 15% to 20%.
- A new 2% allocation for irrigation and agricultural machinery.
- Encouragement to use digital crop zoning data and farmer apps for better planning.
- Expansion of contract farming.
- Inclusion of new crops such as cucumber, taro stolon, jackfruit, beetroot, black cumin, sack-based spice cultivation, and date molasses production in loan guidelines.
Bangladesh Bank expressed confidence that these changes would strengthen macroeconomic stability, ensure food security, and promote sustainable rural development.
The bigger picture
Official data shows Bangladesh has approximately 16.9 million farming households, the majority of whom are subsistence farmers. In FY2024-25, over 3.8 million farmers accessed agricultural loans.
Despite its declining share of GDP, now at 11% in 2024, down from around 62% in the 1960s, agriculture remains the backbone of employment, providing livelihoods for over 45% of the workforce.
Yet, as climate shocks intensify and input costs soar, many fear the latest credit policy does too little, too late to protect the nation’s farmers from economic collapse.
Source: UNB