An Empirical Study on Financial Risks in

Agriculture Sector of Bangladesh

Paper ID-ICBM-19-294

Sadia Afrin Ratna, Sonia Akter

Faculty of Business Studies
Bangladesh University of Professionals (BUP)
Mirpur Cantonment, Mirpur, Bangladesh
.
 Outline of the Presentation
• Introduction
• Overview and Sources of Risk
• Research Objectives
• Research Methodology
• Data Analysis and Discussions
• Prospective Risk Mitigation Strategies
• Solution to Overcome Weakness and Challenges
• Conclusion
• Recommendations
• References
 Introduction
This descriptive study illustrates to identify, evaluate,
and explore the significant relationship between
financial risk and sustainable agriculture. This research
chronologically demonstrates a structured questionnaire
across a few categories; also encompasses the
influencing factors shaping the perception of farmers
and agro-business specialist through quantitative
analysis.
Market Liquidity Credit Operational
Risk Risk Risk Risk

Main Sources of Financial Risk in Agricultural Sector

 Research Objectives
This research attempts to investigate –
• To understand the financial risk exposure in agriculture
sector
• To evaluate what sort of strategies are required to sustain
in agriculture sector and contribute in the economy of
Bangladesh.
• To identify prospective risk mitigation strategies and
future superintendence diminishing financial risk from
agriculture sector
 Research Methodology
• Type of Research: Descriptive Research
• Research Method: Survey Research Technique
• Population: Stakeholders of agribusiness, employees,
farmers/producers, supplier/ retailer, financial managers of
financial institutions
• Sampling Procedure: Non-probability purposive
sampling method
• Sample Size: 30
• Variables: 15
• Questionnaire: Likert Scale & Simple Attitude Scale
Data Analysis and Discussion
15 Variables; 30 Samples
 Summary of Data Collection
120%

100%

Strongly From this chart it is

Agree
80%
Agree cleared most of the
respondents strongly
Netural
60% agreed and agreed with
Disagree the identified variables. So
40% Strongly there is a positive
Disagree
relationship with their
Total
20%
opinion and variables

0%
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15

Independent variables of data

 Correlation Analysis
Credit Dircet Demand/
Good
Currency Government Natural Training
Supply
Chain Debt/loan Weather Production Advanced Interest
Availa
blity
Hypotheses of the Study
facility Selling Supply risk Incentive Disaster Faciliy Manag Repayment Risk Risk technology risk
Market of loan
ement
Credit
facility
1  H0 (Null): There is no
Dircet
Selling
-0.22 1 significant relationship
Demand/
Supply
-0.03 0.065 1 between financial risks
Good
Market
0.022 0.013 0.0069 1 with a sustainable
Currency
risk
-0.09 0.282 0.188 0.132 1
agriculture industry.
Government
Incentive
-0.12 0.183 0.1832 -0.17 0.04563 1
Natural
Disaster
Training
0.105 0.305 0.2398 -0.09 0.03878 -0.04903 1
 H1 (Alternative): There
-0.17 0.036 -0.124 -0.15 -0.1975 -0.1733 0.0631 1
Faciliy
Supply Chain -0.21 0.006 0.2859 0.041 0.18878 0.032545 0.1659 -0.19902 1
is a significant
Debt/loan 0.132 -0.5 -0.01 0.109 -0.3144 -0.49794 -0.033 -0.16026 0.161 1
Weather Risk 0.161 -0.14 -0.041 -0.32 -0.1279 0.024665 0.021 0.140244 -0.13 -0.03921 1 relationship between
Production 0.074 0.043 0.137 0.576 0.02728 -0.13305 0.2638 -0.3045 -0.05 0.26189 -0.2591 1
Advanced -0.25 -0.14 -0.013 -0.24 -0.2198 0.196116 -0.25 -0.25248 0.27 -0.03341 0.021 -0.30151 1 financial risk for a
Interest -0.16 0.347 0.1055 -0.17 -0.0911 0.128532 0.1434 0.27406 0.109 -0.40506 0.2541 -0.13585 0.24577 1
Availablity -0.16 0.247 -0.059 -0.22 0.23054 -0.11948 0.0138 0.311132 -0.25 -0.06291 0.2484 -0.25466 -0.26308 -0.127 1 sustainable agriculture
industry.

Interpretation of results: One of the variable direct selling has

positive relationship with demand/ supply where showing negative
relationship with credit facility. Thus by correlation analysis
represented strength of relationship with other variables.
Regression Analysis Interpretation of Result: Therefore, from
the result determined by the regression
analysis, it is found that the value of F =1.27
is greater than value Sig.F= 0.32 and all P
values are greater than α=0.05, so the null
hypothesis (H0) rejected and established
alternative hypothesis (H1).

Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
I ntercept 2.96505 9.10355 0.32570 0.74915 -16.43872 22.36881 -16.43872 22.36881
Credi t
fa ci l i ty -0.23850 0.26721 -0.89256 0.38619 -0.80804 0.33104 -0.80804 0.33104
Di rcet
Sel l i ng 0.54014 0.31377 1.72144 0.10572 -0.12865 1.20892 -0.12865 1.20892
Dema nd/
Suppl y 0.04698 0.17962 0.26157 0.79721 -0.33586 0.42982 -0.33586 0.42982
Good
Ma rket -0.11430 0.26785 -0.42672 0.67564 -0.68521 0.45661 -0.68521 0.45661
Currency
ri s k 0.27853 0.21882 1.27284 0.22245 -0.18788 0.74494 -0.18788 0.74494
Government
I ncenti ve -0.06715 0.27567 -0.24360 0.81084 -0.65472 0.52042 -0.65472 0.52042
Na tura l
Di s a s ter -0.03670 0.68822 -0.05332 0.95818 -1.50360 1.43020 -1.50360 1.43020
Tra i ni ng
Fa ci l i y 0.30949 0.29378 1.05346 0.30880 -0.31669 0.93567 -0.31669 0.93567
Suppl y Cha i n
Ma na gement -0.40049 0.34594 -1.15767 0.26510 -1.13785 0.33687 -1.13785 0.33687
Debt/l oa n
Repa yment 0.63232 0.72839 0.86810 0.39901 -0.92021 2.18484 -0.92021 2.18484
Wea ther Ri s k 0.48123 0.30881 1.55836 0.13999 -0.17697 1.13944 -0.17697 1.13944
Producti on
Ri s k -0.51708 0.77539 -0.66686 0.51499 -2.16979 1.13563 -2.16979 1.13563
Adva nced
technol ogy -0.10480 0.78167 -0.13407 0.89513 -1.77090 1.56130 -1.77090 1.56130
I nteres t
ri s k -0.48261 0.37020 -1.30364 0.21201 -1.27167 0.30645 -1.27167 0.30645
 Prospective Risks Mitigation Strategies
• Avoiding susceptibility to risk
• Crop diversification and Intercropping
• Diversification of livelihood sources
• Appropriation of forwarding cropping techniques (Fertilization,
Irrigation, Resistant varieties)
• Buffer stock addition of crops or liquid assets
• Crop sharing casual risk pool (contract marketing, future marketing,
insurance)
• Coping with concussions (Ex-post strategies; social assistance, social
funds, government incentives, cash transfer )
• Reducing risk by evolving in capacity building
• Fabricator and Agribusiness Client Aptitude
According to the Bangladesh Bureau of Statistics (BBS)-
 Agriculture grew 4.19 percent in 2017-18, way up from 3.06
percent in the transient estimate.

The World Bank published a report on agriculture status of

Bangladesh which is showing:
 87% of rural households with income from agriculture
 65% of households rely on both farm and nonfarm incomes
 Irrigation augmentation, advanced technology, more dynamic
markets, and wide spread automation are factors behind the
agriculture sector’s growth.
Solution to Overcome Weakness and Challenges

Enabling Access to Finance

Promoting Sustainability
•Increasing production using
fewer resources and reducing
impact on the environment.
Improving energy and water
efficiency
Increasing Productivity
•Building skills and providing
better seeds and inputs.
Helping farmers adopt
modern agricultural practices.
•Facilitating development and
availability of appropriate
financial products such as
weather –based insurance to
cover risks.
Building capacity of
financial institutions to cater
to the needs of small famers.

Facility Access to Markets

• Helping farmers meet the quantity and quality requirements of large
markets
• Strengthening storage and warehousing infrastructure to
reduce field-to-market losses.
 Summary of Findings

The paper identifies the risk management tools to

reduce financial risks. The findings bring forth the
policy interventions needed for Bangladesh agriculture.
Market-friendly policy reforms are expected to promote
better utilization of scarce resources as well as to
promote a strong, dynamic and sustainability of this
sector that would be able to contribute in economic
development of the country.
 Conclusion
The study has shown there is a meaningful relationship between
financial risk and sustainable agriculture sector of Bangladesh. The
research has fully defined the major financial risks and pinpointed
the weights of them on farmers’ survival in Bangladesh. All those
agricultural risks ought chronic and far-reaching adverse impacts
on farmers’ life. State policy missteps in executing the agricultural
risks and lack of known superintendence artifices have sparked the
researchers to develop a process of bargaining the agricultural risk.
The state should spend more consideration to these risks and
continuation and field services should consider their obligations to
manage the risks in the agriculture area.
 Recommendation

• Developing information system

• Empowering rural financial services
• Promoting market-based price risk management
• Targeting worth of cash transfers and safety net
programs
• Experimenting new passageways to agricultural
insurance
• Highlighting disaster planning rather than release
 References
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