Rural households earn more from non-farm activities than agriculture due to the low price of farm products and lack of an appropriate marketing system, a recent survey by Bangladesh Bureau of Statistics found.
Of their average annual income of Tk 91,739, 22.77 percent comes from agriculture sector and 77.23 from the non-agriculture sector, according to the Rural Credit Survey 2014.
The reason, according to Khondker Ibrahim Khaled, former chairman and managing director of Krishi Bank, was that the production cost for agriculture is much higher, which may have eaten into the incomes, the Daily Star reports.
As a result, farmers do not get returns proportionate to their investment, he added.
Subsequently, BBS in the survey report called for making the marketing system of agricultural products more efficient.
Intermediaries in the distribution system in the market should be minimised and free or low-cost storage facilities established in concentrated localities, it said.
A certain time-gap from harvesting should be considered by the loan providing institutions so that farmers can hold out for better prices of their crops rather than selling those right away to repay the loans.
About the higher share of non-farm sector income, Hussain credited it to the substantial economic diversification currently taking place in rural areas.
He also said at least one person from most of the households send remittances from abroad, which inflates their non-farm income.
Furthermore, Khaled said a big portion of the loans taken by farmers are used in the non-farm sector.
Meanwhile, the survey, which was conducted after 26 years in January 2014 to enable the government to make appropriate policies, found that agriculture was still the dominant sector of the economy, engaging about 47 percent of the labour force.
In 2013, the total number of rural households was estimated at 2.47 crore. Of them, 1.2 crore took agricultural loans.
Some Tk 36,579 crore was disbursed in rural credit by different institutional and non-institutional providers during the calendar year.
Of the amount, 17 percent was disbursed through banks, while the nongovernmental organisations distribute 67 percent.
Non-institutional agri-loans, which account for 11 percent of the total credit, are distributed by local moneylenders and friends and so on. The survey also revealed that the majority of the rural borrowers were women (58.5 percent). The annual average expenditure of the households covered by the survey was Tk 1.07 lakh, 46 percent of which was spent on food and 5 percent on repayment of outstanding debts.
Repayment was due in case of about 21 lakh loans but was not paid partially or at all for various reasons, including sluggish business (36 percent), higher household expenditure (26.5 percent), low prices of cultivated crops (12.2 percent), support for medical expenditures (9.3 percent) and crop damage (6.2 percent).
The survey also found that as many as 41 lakh households applied for institutional loans for the first time but their applications were rejected.
The findings also suggest that there are some hidden or unwanted obstacles to getting rural credit.
The survey report also recommended agricultural insurance (crop insurance, livestock and poultry insurance) for borrowers.
Insurance can be embedded with the loan scheme provided by the different loan granting institutions.
It will help protect the borrowers from financial risks, including damage of crops for different natural calamities, low production, loss of domestic animal due to accident and sickness.
The report also called for enhancing the monitoring mechanism of the central bank regarding compliance with the Agriculture and Rural Credit Policy.
It also advocated patronising the landless people more when it came to disbursing rural credit as well as training and guidance for women, as they are the key player in the borrowing households