Bangladesh gained independence in 1971. Since its independence the government
of Bangladesh had taken various measuresto reduce the intensity of poverty on rural
people in Bangladesh. Therefore, the purpose of this study is to examine whether rural
financing played any role in reducing rural poverty and thus increased sustainable
economic development in Bangladesh. To achieve the objective of the paper, we have
tried to identify the determinants of rural poverty. In this study, priority sector lending
such as agricultural sector credit, rural employment, female employment, agricultural
production, and credit to gross domestic product and per capita income have been used as
independent variables to examine the determinants of rural poverty in Bangladesh for the
sample period from 1984 to 2014. The empirical estimation suggests that all the
explanatory variables in the model are significant and are found to be negatively related
to rural poverty. The elasticity of the rural poverty with respect to priority sector lending
is -0.27, implying that a one percent increase in priority sector lending will reduce rural
poverty by 0.27 percent on average. The policy implications of this study suggest that
financial inclusion through rural financing of the central bank and the government has
far-reaching impacts on poverty reduction.