Farmers' Perceptions Towards Agricultural Loan Provided by Commercial Bank: Evidence from Rupandehi District, Nepal

Abstract

Agriculture is a vital sector in Nepal’s economy, contributing approximately 24% to the Gross Domestic Product (GDP) (Economic Survey 2080/81). However, access to agricultural loans from Banking and Financial Institutions (BFIs) remains a significant challenge for farmers due to stringent collateral requirements, complex documentation, delayed loan processing, and unprofessional behavior from bank staff. This study investigates farmers’ perceptions of agricultural loan services provided by commercial banks in Rupandehi District, focusing on four main factors: collateral requirements, documentation complexity, loan processing time, and bankers’ behavior. A descriptive and correlational quantitative research design was employed, with primary data collected from 155 farmers through stratified random sampling. Data were analyzed using SPSS, with descriptive statistics and multiple linear regression employed to examine the relationships between banking services and farmers' perceptions. The findings reveal that high collateral demands and loan disbursement delays negatively affect farmers' perceptions, while simplified paperwork, courteous bank staff behavior, and better loan accessibility contribute to increased satisfaction. Regression analysis confirmed that these factors significantly influence farmers’ perceptions, with banker behavior emerging as the most influential factor. All hypotheses were supported, emphasizing the role of these factors in shaping farmers' experiences. The study recommends that banks simplify documentation, reduce disbursement delays, lower collateral requirements, and train staff to exhibit more respectful behavior, ultimately enhancing the overall experience for farmers. These improvements could foster financial inclusion, promote agricultural commercialization, and inform rural banking policy in Nepal, providing a foundation for future research and policy initiatives in agricultural finance.