Bridging financial gaps to enhance climate resilience and agricultural productivity of smallholder farmers in Northwestern Bangladesh

The threat of climate change-induced drought poses a serious challenge toBangladesh’s smallholders, and despite the effectiveness of the adaptation measures,financial barriers often hinder their adoption—a factor frequently overlooked inexisting studies. This study addresses that gap by investigating the nexus betweenfarmers’ financial situation and their production, vulnerability, and the effectivenessof various adaptation strategies. Using cross-section data from 300 farm householdsacross two climate-affected districts of northwestern Bangladesh, the study employsa two-step Stochastic Frontier Model (SFM) analysis to evaluate the nexus betweenrice productivity and climate adaptation strategies. To further explore the financialbarriers to adaptive capacity, the Harrod-Domar growth equation and MultivariateProbit (MVP) regression were utilized. Moreover, the Foster-Greer-Thorbecke (FGT)index was applied to assess farmers’ vulnerability to climate change. Results reveal anaverage finance gap of 125USD per acre, with 88% of farmers requiring 200USD orless to enhance efficiency. Bridging finance gap substantially increases the likelihoodof drought-tolerant crops (98.50%) and irrigation (90.31%), both of which contributeto higher productivity. However, the analysis also reveals that 49% of farmers are invulnerability depth and providing just 40.95USD per farmer could notably reducethis vulnerability and enhance their adaptive capacity. The results highlight thecrucial importance of focused financial assistance in enhancing resilience. Therefore,government agencies and NGOs should prioritize the provision of appropriate loans,financial assistance, advanced irrigation technology, and agricultural extensionservices to empower smallholder farmers to optimize productivity and meetproduction targets. Keywords: Climate induced drought, Financial barriers, Stochastic frontier model (SFM)analysis, Harrod-domar growth model, Farmers vulnerability index, Bangladesh