In a small branch office of a bank in Kurigram, an elderly woman—let us call her Rahima Begum—waits in line. She holds a wad of cash wrapped in a handkerchief, the monthly remittance sent by her son in Malaysia. She is the ideal customer of Bangladesh’s financial inclusion drive: banked, compliant, dependable.
Next to her sits her grandson. He is young, alert, and ambitious. He wants to buy a harvester. He has a business plan, local demand, and labour lined up. He is here to ask for the loan that will get him started.
When they reach the desk, the branch manager smiles at Rahima and accepts her deposit with practiced efficiency. But when he turns to the grandson, the smile fades. Money, it seems, is in short supply. The bank is happy to absorb the grandmother’s deposit, but is unable to finance the grandson’s potentially productive project.
Of course, the rejection letter was effectively drafted hundreds of miles away, inside a glass tower in the capital. There, a large industrial conglomerate has just defaulted on a thousand-crore taka business loan. The consequences ripple through the banking system. Regulators demand provisioning. Capital ratios tighten. Balance sheets bleed. Within days, a quiet instruction travels from the Motijheel head office to every rural branch: maximise deposits and halt new lending.
The city takes what it can. The villages bear what they must.
Make no mistake: rural Bangladesh is cash-rich and has become the net supplier of capital to the banking system. And yet, only drips of the banking system’s credit reach rural Bangladesh.
Faced with this reality, rural communities behave rationally. They avoid investing in fixed assets such as tractors or harvesters because returns are crushed by inflated input costs, weak logistics and infrastructure, and the absence of affordable credit. In a system where any rise in income is quickly offset by the high cost of living, rents, finance and power structures, long-term investment in productivity becomes a losing proposition rather than an opportunity.
Evaluating a Tk 50,000 loan for a farmer requires nearly the same (if not more) regulatory paperwork, compliance checks, and staff time as a Tk 50 crore loan for an industrialist. This asymmetry in cost structures makes small-ticket lending economically untenable for head-office credit risk management teams.
The standard defence is that rural lending is inherently risky. But the banking system’s largest defaults are not rural; they are corporate. The government has attempted to counter these dynamics through ambitious agricultural credit targets. For the 2025 to 2026 fiscal year, Bangladesh Bank set a target of Tk 39,000 crore.
The headline number sounds transformative. The composition is not. Nearly half of agricultural credit is issued as short-term crop loans to buy fertilisers, pesticides, irrigation, seeds etc, while loans for irrigation and heavy machinery are capped at about two percent.
Much of the remaining credit is absorbed by revolving working capital, repeat crop lending, and institutionally convenient borrowers. State-subsidised funds often reach farmers only after passing through layers of financial markup, making asset accumulation technically possible but practically difficult.
The result is a cycle of subsistence financing. Money goes into the soil, the crop is harvested, the loan is repaid, and the farmer returns to zero. This is operational spending, not capital formation. It sustains output but does not compound it. Even as agricultural credit hit record levels, real wages in rural Bangladesh continued to erode as inflation outpaced earnings.
If this capital starvation persists, the consequence will not merely be lower yields. It will be the long-run exit of rural youth from agriculture, eroding the labour base required to sustain national food security.
None of this is structurally inevitable. Peer economies have addressed similar constraints through different institutional choices. In Kenya, digital lenders rely on mobile money transaction histories and related digital footprints to assess creditworthiness. Structured instruments such as warehouse receipt financing allow stored produce to be pledged as collateral. Vietnam’s banking system has also developed mechanisms to channel credit toward productive agricultural and value-chain activities. A significant share of bank lending supports agri-exports and rural production, reflecting targeted financial support for strategic sectors.
Bangladesh remains bound to an analogue collateral regime. Landlessness is not marginal in rural Bangladesh; it is structural. More than half of rural households do not own land, and a large share of farm households cultivate plots they do not control. Without a title to pledge, many producers are structurally excluded from collateral-based lending. Credit access data reflect this reality. Collateral requirements and high transaction costs often restrict small and marginal farmers from accessing formal agricultural finance from state banks.
Access to bank accounts alone will not fix this problem. What is missing is structural discipline. District-level loan-to-deposit rules would be a credible start. If a bank collects Tk 100 crore from Cumilla, it should be required to lend a meaningful share back into the district. Geographic lending discipline does not eliminate risk; it prevents rural savings from underwriting urban balance-sheet stress.
Critically, the financial system must work toward recognising alternative credit data, including harvest records, warehouse receipts, and verified digital transaction histories. Capital must follow production, not paperwork. High-potential crowdfunding platforms, currently operating in a policy vacuum, should be brought under clear regulatory rules so they can earn public trust and scale responsibly.
The story of financial inclusion has become a narrative to console, a way to signal progress while avoiding a redressing of financial power. This arrangement may stabilise balance sheets of banks in Dhaka today, but it mortgages the country’s future.
The village does not need more accounts. It needs its capital back.
Saba El Kabir is a development practitioner and founder of Cultivera Limited. He can be reached at [email protected].
Views expressed in this article are the author's own.
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