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Impact of Agricultural Loan Disbursement and Chemical Fertilizer Use on the Rice Production in Bangladesh

Mala Rani Das
Department of Economics, Jahangirnagar University, Savar, Dhaka.

Mohammad Amzad Hossain
Department of Economics, Jahangirnagar University, Savar, Dhaka

Abstract/ Executive Summary:

Agriculture is one of the important issues of Bangladesh, where a larger share is related to it for livelihood, food, and socio-economic activities. Agriculture draws considerable attention and is the backbone of the Bangladesh economy. Besides enhancing food and raw materials, agriculture also enhances employment opportunities to a vast number of the population. Agriculture is affected by many factors; among those two crucial factors are agricultural credit and chemical fertilizer. This paper examined the effect of agricultural loan & chemical fertilizer on the total rice production in Bangladesh during the time 1995 to 2016. The study has used data from the economic review 2017. Data are found stationary at the difference at 1% and 5% level of significance using Augment Dicky Fuller (ADF) test. Then the study adopted multiple regressions to see the influence on agricultural loan and chemical fertilizer on total rice production. The result showed that agricultural credit has a positive & statistically significant effect on total rice production, and chemical fertilizer has a positive effect on the total rice production of Bangladesh but not statistically significant.

Keywords: Total rice production, Agricultural loan, Chemical fertilizer, Multiple regression.

Location: In Bangladesh

Start Date: 00-00-1995

End Date: 00-00-2016

Program Area: Socio-economic and Policy

Commodity: Rice, Chemical fertilizer

Objectives:

Agriculture productivity is affected by many things; however, the study examines the impact of agricultural loan and chemical fertilizer on the total rice production of Bangladesh. Credit is badly needed for any kind of business environment, and the agricultural sector is no exception, as it helps transform the agricultural sector into a modern sector. On the other hand, fertilizer adds nutrients to the soil to promote soil fertility and increase plant growth.

Methodology:

Matsumoto & Yamano (2010) emphasized fertilizer credit increases input application for crop production. Using two-year panel data of 420 households in rural Ethiopia credit facility increased inorganic fertilizer use by 35 kilograms per household as well as increased the yield of teff by 37 percent. But the credit program had no significant influence on net crop income per cultivated area and the per capita income. Reviewing the literature, we find the research gap in conducting this study, as very few studies have been conducted adopting the OLS method to see the impact of the agricultural loan disbursement and chemical fertilizer together on the total rice production of Bangladesh.

Variables of this study are the agriculture loan disbursement (Loan in crore taka), chemical fertilizer (urea, TSP, DAP, MOP, SSP, NPKS, ASP, Zinc, Gypsum and others in thousand metric tons) and total rice production (aus, amon & boro) in thousand metric tons. Data used in this study are secondary data, which is taken from Bangladesh's economic review from 1995 to 2017. Data have been converted to logarithmic forms of the variables to maintain statistical simplicity and to obtain desirable properties for the estimates. The study uses the method of multiple regression followed by some tests such as–Breusch-Pagan test, Breusch-Godfrey test, JarqueBera test, VIF for Multicollinearity test, and stability test for the dependent variable. The results of the study have been analyzed by using MS Excel, Stata 12, and Eviews 9.5.

Source of Information: Bangladesh Journal of Public Administration (BJPA), 27(2): 84-96, 2019 ISSN: 1563-5023 (print), 2664-4622 (online)

Article Link (Online Journal):

Funding Source:

Budget:

Total Budget (Tk.) :

Achievement/Findings:

Agriculture is the prime sector of Bangladesh's economy. It is the oldest but still a crucial sector for Bangladesh. The present study shows the influence of agricultural loan disbursement and chemical fertilizer on total rice production. And the study reveals that agricultural loan has a positive and statistically significant effect on total rice production while chemical fertilizer has a positive but statistically insignificant effect. The regression result confirms that if agricultural loan increases by 1%, then total rice production increases by 0.267520%.

Moreover, the study has fulfilled the necessary tests of residual analysis. Residuals in this study are not serially correlated; they are homoscedastic and normally distributed. From the stability test, the study has found that the dependent variable in the model is stable. The agricultural loan increases agricultural production; these findings support all literature cited here accept Hussain (2012). Whereas the results of the insignificant effect of chemical fertilizer on agricultural production support the conclusions of Patra et al. (2016), Savci (2012), and Hussain (2012). However, the study focuses only on the impact of agricultural credit and chemical fertilizer on total rice production. Still, there are other variables like irrigation, cultivatable land area, seeds, etc., which affect rice production are not considered in the present case, and this is a limitation of the study, which paves the way for other research. Chemical fertilizer causes groundwater contamination as nitrates generated from nitrogen fertilizers can easily pass through the soli and can stay in groundwater. Groundwater contamination contributes to gastric, cancer, birth malformation, hypertension, testicular cancer, stomach cancer. Chemical fertilizer may cause respiratory ailments, 'methemoglobinemia,' which is called 'Blue Baby Syndrome.' So chemical fertilizer is not so conducive for health and environment, and that's why the study recommends supporting organic fertilizer, which is favorable for health, environment, and agricultural production as well as will be helpful for the economic development of Bangladesh. And the study also recommends taking a more favorable agricultural loan disbursement policy to facilitate more agricultural loan disbursement than the present loan disbursement, which is prevailing at present both from institutional and non-institutional loan sources.

Knowledge Management: Journal