Agricultural Loan Management by Mobile Banking: Opportunities and Challenges

Abstract

In Bangladesh, agriculture is not merely an economic activity, it is the backbone of rural life. Yet, traditional agricultural loan systems often leave farmers disadvantaged due to long processing times, excessive paperwork, and limited access to financial institutions. This study aims to evaluate the effectiveness of a digitized agricultural loan system powered by Mobile Financial Services (MFS) and electronic Know Your Customer (e-KYC) processes in overcoming these barriers. Using survey responses from 111 professionals engaged in agricultural loan management, the study compares traditional loan practices with a proposed automated model. The findings reveal that the digital system reduces loan approval time by an average of 62%, cuts operational costs by approximately 45%, and significantly improves accessibility and transparency. While the model promises transformative benefits, constraints such as inadequate rural internet infrastructure, low digital literacy among farmers, and the lack of digitized land and identity records pose challenges. Therefore, the study recommends coordinated efforts from policymakers, banks, telecom operators, and agricultural agencies to expand rural connectivity, simplify user interfaces, digitize essential documents, and provide digital training for farmers. By implementing these strategies, Bangladesh can modernize its agricultural finance ecosystem, promote financial inclusion, and enhance rural resilience.