The Fragmented Rules of Brazilian Rural Credit

This policy brief by the Climate Policy Initiative analyzes the complexity and fragmentation of the National Rural Credit System (SNCR) in Brazil. It argues that the current system, based on a 1960s framework, creates artificial obstacles to credit access and inconsistent loan conditions based on geographic location, farm size, and revenue, rather than agricultural potential.

• The Brazilian rural credit system is highly fragmented, consisting of numerous funding sources and programs with intricate rules. For the 2016-2017 agricultural year, the system comprised 20 funding sources and 13 programs, including dozens of sub-programs; for example, PRONAF alone had 16 sub-programs with interest rates ranging from 0.5% to 5.5%.
• Rural credit availability is heavily influenced by geographic location and the presence of distribution channels (bank branches and cooperatives) rather than agricultural potential. In the South, Southeast, and Midwest, credit is primarily driven by Rural Savings and Compulsory Resources, while the North and Northeast rely heavily on the Northern and Northeastern Constitutional Funds.
• The Constitutional Funds create geographic discontinuities in credit access and terms. Loan limits and conditions vary based on municipality classifications (Income, Priority Areas, and Border Regions). For instance, micro and small producers in Priority Areas or Low-Income areas in the Northeast have production cost loan limits 35% higher than producers of the same size in other municipalities in the same region.
• Eligibility for key programs like PRONAF and the ABC program is based on 'fiscal modules,' a unit of area defined by INCRA in the 1980s that has not been updated. Because these modules vary by municipality and do not reflect modern productivity gains (such as in the Cerrado biome), farmers with identical land sizes in neighboring municipalities can be classified differently—one as a family farmer and another as a medium or large property owner.
• Revenue-based eligibility criteria for PRONAMP and the Constitutional Funds have shifted drastically over time, suggesting they may be used as political instruments. For PRONAMP, the maximum revenue limit for medium-sized producers rose from R$500,000 in 2010-2011 to R$1.76 million in 2016-2017. In the Constitutional Funds, a producer with R$2 million in revenue would have been 'large' in 2010 but 'small' in 2011, gaining access to more favorable rates.

APA

Souza, P., & Assunção, J. (2018). The Fragmented Rules of Brazilian Rural Credit. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/08/CPI_Brief_Fragmented_Rules_Brazilian_Rural_Credit-1.pdf

Chicago

Souza, Priscila, and Juliano Assunção. The Fragmented Rules of Brazilian Rural Credit. Climate Policy Initiative, 2018. https://www.climatepolicyinitiative.org/wp-content/uploads/2018/08/CPI_Brief_Fragmented_Rules_Brazilian_Rural_Credit-1.pdf.

Wikipedia

{{cite report |last1=Souza |first1=Priscila |last2=Assunção |first2=Juliano |title=The Fragmented Rules of Brazilian Rural Credit |publisher=Climate Policy Initiative |date=July 2018 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2018/08/CPI_Brief_Fragmented_Rules_Brazilian_Rural_Credit-1.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{souza2018fragmented, author = {Souza, Priscila and Assunção, Juliano}, title = {{The Fragmented Rules of Brazilian Rural Credit}}, institution = {Climate Policy Initiative}, year = {2018}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2018/08/CPI_Brief_Fragmented_Rules_Brazilian_Rural_Credit-1.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }