Role of credit in mechanization of paddy production in a selected area of Bangladesh

Abstract

Agricultural credit plays an important role in facilitating the adoption of mechanized technologies and improving the productivity of paddy farming in Bangladesh. This study examined the socioeconomic characteristics of Boro rice farmers, assessed credit sources and farm profitability, estimated the impact of agricultural credit on the level of mechanization, and identified the major constraints to mechanization in Mymensingh district, Bangladesh. Primary data were collected through a field survey using a semi-structured interview schedule from 80 Boro rice farmers, comprising 40 credit recipients and 40 non-credit farmers. Descriptive statistics, profitability analysis, and Propensity Score Matching (PSM) were employed to analyze the data. The results showed that NGOs were the principal source of agricultural credit (60%), with most farmers receiving loans ranging from Tk. 30,000 (US$245.28) to Tk. 50,000 (US$408.80). Boro rice cultivation was profitable for both groups; however, credit recipients achieved higher net returns and benefit–cost ratios than non-credit farmers. The PSM analysis demonstrated that agricultural credit had a positive and statistically significant effect on farm mechanization. Credit recipients achieved a mean mechanization score of 4.00 compared with 3.32 for matched non-credit farmers, resulting in an Average Treatment Effect on the Treated (ATT) of 0.68. Despite these benefits, farmers faced several problems and constraints in adopting mechanization including complex bureaucratic procedures for credit, lack of collateral and high machinery prices. The findings highlight the simplification of the loan application procedures, machinery subsidies and the expansion of extension services to accelerate mechanization and promote sustainable Boro rice production in Bangladesh.