Rural credit acquisition for family farming in Brazil: Evidence from the Legal Amazon

Abstract

Family farmers are important actors to sustain food security and job generation in Brazilian rural areas. The National Program for Strengthening Family Farming (PRONAF) is the main public program offering microcredits to family farmers to foster sustainable production and reduce the poverty gap. While poverty and income inequality prevail in the Amazon, credits seem to target wealthier livestock farmers, and neglect smallholders engaged in crop production. This paper assesses the factors influencing the monetary amount of credit received at the regional level and argues that stable production systems and strong credit mechanisms could facilitate market access, knowledge transfer, and technology adoption. A spatial Durbin error model is utilized to analyze the factors determining the credit received while controlling for spatial correlations in livestock and agricultural systems in 103 microregions, composing the Brazilian Legal Amazon. To complement the quantitative estimations, we conducted 35 semi-structured interviews with key informants from technical assistance, scholars, and banks managers. Results suggest a geographical interdependence of PRONAF microcredit allocation, where wealthier farmers steadily access markets and credits. Microregions where commercial banks are present and with higher production values receive higher microcredits, strengthening the economic advantages of wealthier farmers located in those regions. Therefore, in order to improve credit allocation, political actions should focus on targeting poor and vulnerable farmers lacking social networks, stable markets and financial investments.