The Impacts of Rural Credit on Agricultural Outcomes and Land Use

This policy brief by the Climate Policy Initiative (CPI) analyzes the impact of Brazil's rural credit system on agricultural production and land use between 2002 and 2017. The analysis finds that while rural credit generally boosts production, its environmental impacts vary significantly by producer size: credit for small farmers tends to increase productivity and reduce deforestation pressures, whereas credit for large farmers is associated with the expansion of cropland and pastures, leading to higher deforestation.

• Rural credit for small farmers, specifically through the PRONAF program, increases both agricultural production and productivity while reducing pressures for deforestation. A 1% increase in municipal PRONAF credit supply leads to a 0.09% expansion in crop area and a 0.12% decrease in pasture area, resulting in a 0.03% increase in forest area.
• In contrast to small farmers, rural credit for large farmers and firms is associated with the expansion of both cropland and pastures, which leads to increased deforestation. This suggests a Jevons paradox where increased resource efficiency for large landowners leads to an increased demand for land.
• There is a significant disparity in how rural credit is distributed across producer types. While firms represent only 1% of producers, they account for 85% of the area receiving credit and 29% of the total credit amount. Conversely, PRONAF (the primary source for small farmers) represents 74% of the number of contracts but only 14% of the credit amount.
• The impact of credit on production varies by the legal organization of the producer. Farmers operating as individuals show increases in both production and productivity when credit supply increases, whereas those operating as firms are not affected, suggesting that farming enterprises are not financially constrained.
• The use of credit for working capital and investment supports crop production and productivity, helping farmers expand and improve yields. For cattle ranching, investment credit specifically increases productivity (a 1% increase in investment credit leads to a 0.19% increase in cattle productivity), but does not induce production expansion.
• The authors recommend that Brazilian policymakers prioritize the distribution of rural credit to small farmers to align agricultural subsidies with forest conservation and mitigate environmental damage.

APA

Assunção, J., & Souza, P. (2020). The Impacts of Rural Credit on Agricultural Outcomes and Land Use. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/03/PB-Impacts-of-Rural-Credit.pdf

Chicago

Assunção, Juliano, and Priscila Souza. The Impacts of Rural Credit on Agricultural Outcomes and Land Use. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/03/PB-Impacts-of-Rural-Credit.pdf.

Wikipedia

{{cite report |last1=Assunção |first1=Juliano |last2=Souza |first2=Priscila |title=The Impacts of Rural Credit on Agricultural Outcomes and Land Use |publisher=Climate Policy Initiative |date=March 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/03/PB-Impacts-of-Rural-Credit.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{assuno2020impacts, author = {Assunção, Juliano and Souza, Priscila}, title = {{The Impacts of Rural Credit on Agricultural Outcomes and Land Use}}, institution = {Climate Policy Initiative}, year = {2020}, month = mar, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/03/PB-Impacts-of-Rural-Credit.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }