Despite bold promises of digital financial services, agent banking, and rural outreach, the dream of financial inclusion in Bangladesh is faltering. Rural communities-once seen as the engine for inclusive growth-are now facing a reversal in access to credit, threatening both livelihoods and long-term economic development.
According to the latest data from Bangladesh Bank, non-farm rural credit disbursement has declined by nearly 24% in the first ten months of the 2024-25 fiscal year. From Tk 4,330 crore disbursed during the same period the previous year, the amount has dropped to Tk 3,310 crore. This is not just a statistical dip-it signals a deeper contraction in rural financing, with potentially grave implications for employment, income generation, and national economic resilience.
While mobile financial services (MFS), agent banking, and digital sub-branches have proliferated in rural regions, their impact remains skewed: they primarily serve deposit collection, not credit disbursement. The one-sided nature of this expansion raises critical questions about the direction of Bangladesh’s financial sector and the sincerity of its inclusion agenda.
Why Credit Matters: A Lifeline for the Rural Economy: In Bangladesh, rural areas account for over 65% of the total population and a large proportion of employment. While agriculture remains a foundational pillar, rural livelihoods have increasingly diversified into micro, small, and home-based enterprises. From poultry farms to handicrafts, food processing units to local trading, these ventures offer critical income for millions-especially women and marginalized groups.For such enterprises, access to affordable credit is not a luxury but a lifeline.Yet, this lifeline is shrinking.
Bangladesh Bank data shows that alongside the 24% drop in rural loan disbursement, loan recovery has also declined by 2.22%-a worrying sign that both lenders and borrowers are struggling in an increasingly volatile economic environment.Economist Dr. Fahmida Khatun, in an interview with Banik Barta, put the implications bluntly:”The decline in credit distribution among the marginalized means that those running small businesses are unable to scale up or even sustain operations. Many are being forced to shut down. This weakens the foundation of financial inclusion and erodes gains in rural employment and income.”
Structural Problems: High Cost of Funds and Interest Rate Liberalization: According to commercial bank officials, the primary culprit is the rising cost of funds due to a persistent liquidity crisis. Simultaneously, interest rates have been liberalized across the board since May 2024, removing the previous cap of 8% for agriculture and marginal sector loans. Market-based rates, which are currently hovering between 11-13% for small borrowers, have priced out many rural clients.
“Borrowers in the marginal sector simply can’t afford these rates,” said a senior executive of a state-owned bank. “And from the bank’s side, operational costs for disbursing and collecting loans in rural areas remain high, making these loans commercially unattractive.”Banks are now increasingly prioritizing urban clients, large businesses, and secured lending-leaving the rural population, particularly those engaged in informal or semi-formal enterprises, out in the cold.
A Missed Target: Rural Lending Falls Short of Goals: The Bangladesh Bank’s rural and agricultural credit target for FY 2024-25 was Tk 38,000 crore, distributed among public and private commercial banks as well as specialized financial institutions.But the disbursement in the first ten months (July to April) was only Tk 29,000 crore-falling Tk 9,000 crore short of the annual target, with little hope of catching up in the final two months. Experts believe that even this disbursement is disproportionately weighted toward agricultural inputs, while non-farm sectors like rural SMEs and microenterprises remain severely underfinanced. Voices from the Field: The Cost of Credit Contraction: In Gaibandha’s Fulchhari upazila, Runa Akter, a 32-year-old entrepreneur who runs a home-based pickle business, has already felt the consequences.”I used to borrow Tk 30,000 every six months to buy raw ingredients. This year, the bank said they’re not giving small loans anymore. I had to borrow from a local moneylender at 5% monthly interest,” she shared. “Now most of my profits go to interest payments.”In Madaripur, 45-year-old Jashim Uddin, who employs three workers in his small poultry farm, said he had to lay off one staff member.”The bank used to support me. This year, they said there’s no budget. Feed prices are up.
Without loans, I can’t keep this business afloat.”These stories are echoed across rural Bangladesh, where micro and small enterprises-the backbone of rural development-are being starved of capital.
Employment Impact: Rising Unemployment in Rural Areas: The Bangladesh Bureau of Statistics (BBS) released its latest labor force survey on May 18, 2025, showing that unemployment rose to 2.62 million by the end of 2024, up from 2.46 million in 2023. Economists attribute a significant portion of this rise to job losses in rural areas, especially among youth and women in the informal sector.”We are witnessing the contraction of rural entrepreneurship, not just agriculture,” said development researcher Dr. Munshi Kamal. “Rural credit is directly tied to rural job creation. When banks cut funding, it sets off a domino effect: less business activity, fewer jobs, more migration to cities, and growing urban poverty.”
Digital Networks: Growth Without Depth: While rural financial networks have expanded through agent banking, mobile wallets, and sub-branches, these services are largely limited to savings, remittances, and bill payments. Few of these platforms offer meaningful credit products, especially not for businesses.”We’re digitizing financial services, but not democratizing credit,” said Dr. Fahmida Khatun. “People can deposit Tk 500 through an agent-but they still can’t access a Tk 10,000 loan to buy equipment or grow their inventory.”The mismatch between infrastructure and service depth is deepening economic exclusion, not fixing it.
Way Forward: Policy, Stability, and Targeted Intervention: Policymakers and banking leaders are beginning to acknowledge the problem, but solutions remain elusive.
Pubali Bank Managing Director, Mohammad Ali, told the correspondent:”Loan growth is weak across the private sector. Naturally, agricultural and rural lending is also affected. To restore confidence, we need political and social stability. Only then can banks expand credit without excessive risk.”But experts argue that beyond stability, the government must:Reintroduce interest rate subsidies or targeted caps for rural credit, Provide refinance schemes through Bangladesh Bank for rural enterprises, Digitally integrate credit products with existing agent banking platforms, Ensure accountability in reaching rural credit targets,
Inclusion Must Mean Access, Not Just Presence: The decline in rural credit is more than a financial trend-it is a warning bell.Despite flashy dashboards and rising numbers of digital banking points, true financial inclusion remains shallow. Without credit, rural businesses cannot grow. Without rural enterprise, job creation stalls. Without jobs, poverty rises-and with it, instability.Bangladesh’s rural economy has been resilient in the past, absorbing shocks and adapting to changes. But it cannot survive long without access to capital.Financial inclusion must not be a slogan. It must be a commitment. And that commitment begins with restoring the flow of credit to where it is needed most-on the farms, in the courtyards, in the village markets, and in the hands of the nation’s working poor.
