- Farmers in coastal Bangladesh are increasingly defaulting on their loans as climate change-induced storms destroy the farms they have pledged.
- Agricultural loans for the year to May 2022 amounted to the equivalent of $3 billion, or one-fifth of the value of all loans disbursed in Bangladesh.
- Increasingly frequent and violent storms therefore threaten the country’s financial sector as much as it does farming communities and the environment.
- Warming seas in the Bay of Bengal due to climate change are supercharging storms, giving them more energy, helping them push tidal waves further inland and dumping greater volumes of storms. rain than before.
DHAKA – Wasim Ali, 45, lived in one of 55,000 homes destroyed by the deadly super cyclone Amphan in May 2020. The tropical storm caused a tidal surge that swept away his house and leveled his small farm, measuring only 0.4 hectares (1 acre). Thousands of people were left without resources after this huge natural disaster. But for Wasim Ali, a resident of Protapnagar in the Satkhira district of southwestern Bangladesh, the misery runs deeper.
Along with the loss of his home and farm, the disaster also left him without the means to repay a debt of 42,000 takas ($440), an amount he had borrowed from a bank as an agricultural loan. . He had pledged his farmland as collateral and says he is now afraid to confront bank officials.
“I can barely support my family of five on the small piece of land I’ve managed to grab since the disaster. It’s impossible to repay the loan on land that doesn’t even exist anymore,” Wasim says.
Collateral wiped out
Nearly a third of Bangladesh’s total landmass is in its coastal zone, which spans 47,201 square kilometers (18,224 sq mi), according to a study. This area is home to approximately 35 million people, or 29% of the country’s population.
These communities rely heavily on agriculture, working on their small, fragmented lands. In a form of short-term assistance, the government is making available up to 50,000 taka (about $530) in agricultural loans to small farmers, disbursed through commercial banks. These loans carry interest rates ranging from 5 to 10 percent for a single crop year, depending on the bank and the type of crop, and farmers are expected to repay the principal plus interest after harvest.
Although loan amounts are small at the individual level, collectively, agricultural loans constitute a significant portion of Bangladesh’s banking business. The country’s central bank says agricultural loans for the year until May 2022 amounted to 284 billion takas (3 billion dollars). This constituted 20% of all loans distributed in the country during this period. An agriculture-focused, state-owned lender Bangladesh Krishi Bank (BKB), disbursed 200 billion takas ($2.1 billion) of these agricultural loans.
For these banks, however, the coastal regions are a headache: farmers there are increasingly in default due to natural disasters induced by climate change.
According to BKB, the two most affected sub-districts of Satkhira – Assasuni and Shyamnagar – have outstanding loans totaling 78.1 million takas ($822,500 million), disbursed through its three branches in Assasuni, Gunakarkathi and Shyamnagar. Another state-owned lender, Agrani Bankcurrently has 15 million taka ($158,000) on its books from two of its branches, in Assasuni and Shyamnagar.
During a visit to Assasuni, where Wasim Ali’s home and farm were destroyed by Super Cyclone Amphan, Mongabay met several other people in similar dire situations.
Hasan Mollah has been listed as defaulter since another cyclone, Aila, hit the area more than a decade ago in May 2009.
“After losing the land, I lost my house and my source of income. To support my family, I had to move to town. Even so, I couldn’t find the 38,000 takas [$400] to repay the loan,” Hasan said.
The central bank has since 1991 made concessions for farmer-borrowers like Wasim and Hasan who were hit by natural disasters. These release them from interest payments as long as they repay the principal amount.
“Banks operate like a business by lending loans, so they cannot lose their capital,” BKB managing director Md. Ismail Hossain told Mongabay. “We have rescheduled the loans and still have 21.3 million takas [$224,300] in this area which is classified”, or in the books.
Land loss due to climate change
A third of Bangladesh is just 1–4 meters (3.3–13.1 ft) above sea level, and 80% of the country is floodplain. The southwestern coast, including Satkhira district, is less than 2 m (6.6 ft) above sea level.
This makes every millimeter of sea level rise a cause for concern in this densely populated region. Scientists estimate that by the year 2100, global warming will contribute to sea level rise of 0.5 to 2 m (1.6 to 6.6 ft). This would leave most of Bangladesh under water.
For now, the Sundarbans, the largest expanse of mangrove forest in the world, protect the country’s southwest coast. But increasingly frequent and intense cyclones bring heavy swells that threaten to break the resistance of the mangroves.
In Protapnagar, where Wasim Ali lives, a series of storms from 2019 to 2021, including Amphan, permanently submerged some 20 hectares (nearly 50 acres) of land, according to results of the Center for Environmental and Geographic Information Services (CEGIS), a government research institute.
The storms also threaten another water-related disaster. The Water Development Board, responsible for safeguarding the country’s dams, said the embankment of the Kholpetua River, which runs through Shyamnagar and Assasuni sub-districts, has been weakened by repeated blows from storms . Following Cyclone Yaas in May 2021, the agency undertook emergency repair of nearly 12 km (7.5 mi) of embankment at Protapnagar and nearly 5 km (3 mi) at Padmapukur in Shyamnagar.
“The whole embankment is in a vulnerable state as it was built around 60 years ago,” said Shamim Hasnain Mahmud, executive engineer at the Water Development Board. “Cyclones accelerate its decline.”
According to the Meteorological Department of Bangladesh Data, the southwestern part of Bangladesh faced at least eight cyclonic storms between 2000 and 2020. Four were classified as severe to very severe, causing storm surges of up to 6 m (20 ft). Three of them – Fani in May 2019, Bulbul in November 2019 and Amphan in May 2020 – struck within a year.
Cyclones may be a regular occurrence in the funnel structure of the Bay of Bengal, but climate change is making the storms more devastating. Warming sea surface temperatures increase the maximum potential energy a storm can achieve. And last May, the water temperature in the Bay of Bengal hit record highs, according to Nasa.
Storms with more power and water release more rain and raise the sea levels., allowing tidal waves to rush further inland. This is why places like Protapnagar, 80 km (50 mi) from the Bay of Bengal, be battered by cyclones like Amphan.
Banks fail when farmers fail
CEGIS has predicted that between 2021 and 2023, the Padma Basin is vulnerable to 1,215 hectares of river erosion.
The United Nations agency for disaster reduction estimates that Bangladesh’s average annual losses could amount to $3 billion, or up to 2% of GDP, according to a 2021 World Bank study. report. In addition to its baseline losses from weather hazards, Bangladesh is expected to incur additional costs from climate change by mid-century. If mitigation efforts are not intensified, this figure could reach 9% of GDP by the end of the century.
Golam Rabbani, head of the Climate Bridge Fund secretariat at development NGO BRAC, said the actual amount of loss and damage will be much higher.
“It took five years to remove the saline solution from the ground after Cyclone Aila [in 2009], thus restoring rice production to pre-Aila levels, a study found,” he said, adding that the loss and damage estimates only take into account immediate effects. “Data on migration or alternative forms of employment are not kept in affected areas.”
Hossain, the bank manager, said that since the profitability of a bank branch depends on the economic well-being of local borrowers, migration and loss of livelihoods are detrimental to the bank’s operations. “Banks also fail if they fail,” he said.
Banner image: Residents of the coastal communities of Satkhira. Image by Maksuda Aziz for Mongabay.