Can credit promote rural transformation? Evidence from district-level data in Bangladesh

In this paper, we assess the impact of credit on rural transformation in Bangladesh. District-level rural data from three waves of the Bangladesh Household Income and Expenditure Survey (HIES) were analyzed using ordinary least squares and fixed-effects panel regression analysis. The findings indicate that increasing household credit significantly stimulated the production of high-value agricultural commodities and expanded opportunities for non-farm employment in rural areas. Robustness analysis using access to credit instead of average household credit confirmed the positive relationship between credit and rural transformation at the district level. Access to education and electricity was also found to be positively related to rural transformation; on the other hand, the decline in land per capita was directly related to rural non-agricultural employment opportunities. Our findings highlight the necessity of improving credit accessibility, enhancing capacity-building skills and knowledge of both institutions and individuals, and implementing financial literacy programs for an inclusive, sustainable rural transformation in Bangladesh.