Factors Influencing Farmers’ Access to Formal Credit Market in Naogaon District of Bangladesh: An Empirical Analysis

Modern agriculture is expensive as performing agricultural activities nowadays requires huge investment. But some farmers do not have sufficient money to purchase and use such modern inputs like power tiller, harvester, deep-tube wells, fertilizers and pesticides in many cases. In Bangladesh, farmers are always found to face difficulties in access to credit services from both formal and informal service providers. As a result, their productivity and growth are impeded by a lack of access to agricultural loans. To investigate this phenomenon, this study aims to analyze the scenario of formal credit sources and to identify the factors that influence the access for farmers to formal credit market in Naogaon district. Primary data used for the study were collected with the aid of well-structured questionnaire from farmers and bank officials. Multi-stage sampling techniques were used to select the 200 respondents. The data were analyzed using descriptive statistics and a binary logistic regression model. The Likert scale was used to identify constraints regarding to credit acquisition from formal credit market. The results of the descriptive analysis showed that 6% farmers failed to repay their loan while 94% timely repay their loan. In terms of purpose of using agricultural credit, it is evident that 68% farmers use agricultural credit for managing their agricultural expenses while 17% respondents use loan for the purpose of paid their previous loan. In addition, 10% respondents use loans for the purpose of maintain their family expenses. Results found from the binary logit model indicate that farm size, education, farming experience, access to extension service, access to guarantor, own savings account are positively related with the log of odd ratio in favor of access to formal credit market while the same is influenced negatively by age, off-farm income and default on loan repayment. The farmers in the study area have recognized collateral security as the major constraint relating access to formal credit market followed by the lack of guarantor and bureaucratic complexity. It was recommended that the socioeconomic characteristics of farmers should be considered when formulating and implementing policies to improve farmers’ access to agricultural loans.