Bridging financial gaps to enhance climate resilience and agricultural productivity of smallholder farmers in Northwestern Bangladesh

The threat of climate change-induced drought poses a serious challenge to Bangladesh’s smallholders, and despite the effectiveness of the adaptation measures, financial barriers often hinder their adoption—a factor frequently overlooked in existing studies. This study addresses that gap by investigating the nexus between farmers’ financial situation and their production, vulnerability, and the effectiveness of various adaptation strategies. Using cross-section data from 300 farm households across two climate-affected districts of northwestern Bangladesh, the study employs a two-step Stochastic Frontier Model (SFM) analysis to evaluate the nexus between rice productivity and climate adaptation strategies. To further explore the financial barriers to adaptive capacity, the Harrod-Domar growth equation and Multivariate Probit (MVP) regression were utilized. Moreover, the Foster-Greer-Thorbecke (FGT) index was applied to assess farmers’ vulnerability to climate change. Results reveal an average finance gap of 125USD per acre, with 88% of farmers requiring 200USD or less to enhance efficiency. Bridging finance gap substantially increases the likelihood of drought-tolerant crops (98.50%) and irrigation (90.31%), both of which contribute to higher productivity. However, the analysis also reveals that 49% of farmers are in vulnerability depth and providing just 40.95USD per farmer could notably reduce this vulnerability and enhance their adaptive capacity. The results highlight the crucial importance of focused financial assistance in enhancing resilience. Therefore, government agencies and NGOs should prioritize the provision of appropriate loans, financial assistance, advanced irrigation technology, and agricultural extension services to empower smallholder farmers to optimize productivity and meet production targets.