Definition of Agricultural Finance

Agricultural Finance usually means studying, examining and analyzing the financial aspects of the farm
business. The financial aspects include money matters relating to the production of agricultural products
and their disposal. Disposal indicates marketing related activity. In this respect of agricultural finance,
Bangladesh has no marketing related activities. The only production cannot develop agricultural finance.

Scope

Two-level of scope:

1.Micro: It refers to an individual or area-specific bank loan. For instance, farm loan, livestock loan,fish-
culture loan, household loan.

2.Macro: It deals with the country. To give a clear example, Bangladesh Bank allots 6,00,00,000 Tk for an
agricultural loan.

Significance of Agricultural Finance

Scarce resources are not a problem concerning the agricultural finance of Bangladesh. Singapore has no
mentionable resources, yet its per capita income is so much higher than that of Bangladesh.

Implementation or utilization of resources is the main problem with regard to agricultural finance in
Bangladesh. Newly developed seeds increase agricultural production. Namely, maize production statistics
of today and before 15 years. Farm assets will be increased by giving loans or credit for purchasing
agricultural equipment such as power tiller, loan for livestock farm, Infrastructure of agriculture will be
developed through large scale investment. To illustrate, irrigation project in Barind region of Rajshahi, Rural
development of the agricultural project including fertilizer, farm area.

Credit is the main concept of agricultural finance.

Criteria of credit:

 Time
 Purpose
 Security
 Lenders Classification

Agricultural Financial Markets

Commercial banks, the Farm Credit System, Insurance companies, and agricultural co-operatives are the
agricultural financial market. These deal with financial instruments. The financial instrument includes cash,
share, the bond which are used for loan purpose. The Farm Credit System encompasses the rural area
based financial activities. Namely, discount brokers' business, village moneylenders' business — these are
not legally approved. In Bangladesh, no insurance companies are observed now. Sandhani Life Insurance
Company Limited closed its business in the 1990s due to the dishonesty of people and the
unconsciousness of the farmer about insurance.