The Role of Rural Credit in Agricultural Technology Adoption: The Case of Boro Rice Farming in Bangladesh

Abstract

Rice agriculture provides millions of households with a steady source of income and employment. However, for small and marginal farmers, the exorbitant cost of production inputs presents a formidable obstacle in their pursuit of acquiring it. Credit constraints are a significant impediment to the adoption of agricultural technologies. Therefore, this paper identifies the determinant of access to rural credit and its impact on Boro rice production technology adoption in Bangladesh using cross-sectional data. The study employed probit regression, propensity score matching (PSM), inverse probability weighting (IPW), and inverse probability weighted regression adjustment (IPWRA) techniques. The findings indicate that age, family size, working members, and involvement in safety net programs negatively and significantly influence access to rural credit, while earning persons in the family, literacy, rice farming experience, remittance, and total income positively influence access to rural credit. The positive and significant ATT values suggested that access to rural credit has a positive and significant effect on technology adoption and the level of technology use. It was also found that access to rural credit has a heterogeneous effect. In particular, non-government organization (NGO) credit has a more significant impact on technology adoption than formal bank credit. Access to credit and the adoption of agricultural technologies can be greatly improved with the help of a location-specific rural credit policy and strong monitoring from the formal banking sector.