The Impact Of Private Commercial Bank Branch Expansion On Agricultural Yield

This paper examines whether the bank branch expansion of private commercial banks of Bangladesh has any impact on the district level economic development in Bangladesh.Branches of 56 banks,38 of them are privately-owned commercial banks,are dispersed over the 64 districts in 8 divisions of Bangladesh.I personally constructed a rural and urban branch expansion data set from 2008 to 2015 to estimate the effect of rural and urban branch expansion policy from 4:1 to 1:1 in 2011.However,from the data of bank branch expansion in rural and urban areas,no impact of this policy change was visible in terms of increased growth in rural branches after 2011.As a result,I studied the impact of urban and rural bank branch expansion and disbursement of agricultural credit of private commercial banks in district level economic development in terms of agricultural yield in metric ton per hectare for major agricultural crops.Using a dynamic linear panel data model with fixed effects,I found that most of the major crops yield per hectare of the previous year contributes significantly to the yield per hectare in the present year.However,since,OLS model may be biased because of violation of strict exogeneity,I estimated the dynamic panel data model using maximum likelihood method.In this method,I found that past yields contribute substantially significantly to the current yields for all major crops.As per this data is concerned,number of urban or rural private commercial bank branches per capita of previous year has no statistically significant impact on agricultural yields,except for Boro rice,which is decreased by 0.07 metric ton per hectare.Similarly,for each additional standard deviation,past agricultural loan to deposit ratio in urban branches increases Wheat yield by merely 0.0012 metric ton per hectare.However,although these effects are statistically significant,they are not substantial.The impact of past agricultural loan to deposit ratio in rural branches on agricultural yield is found to be statistically insignificant.