The Impacts of Rural Credit on Agricultural Outcomes and Land Use

The analysis finds that rural credit for small farmers (specifically through PRONAF) increases crop and cattle productivity and reduces deforestation by converting pasture to cropland. Conversely, credit for large farmers and firms is associated with the expansion of both cropland and pasture, leading to higher deforestation. The document recommends that Brazilian policymakers prioritize small farmers in credit distribution to align subsidies with forest conservation goals.

• Rural credit for small farmers, particularly through the PRONAF program, increases both production and productivity while reducing deforestation pressures. A 1% increase in municipal PRONAF credit supply leads to a 0.10% increase in crop production productivity and a 0.14% increase in cattle productivity per hectare, while expanding crop area by 0.09% and decreasing pasture area by 0.12%, resulting in a 0.03 increase in forest area.
• Credit provided to large farmers and those organized as firms is associated with higher levels of deforestation. While this credit contributes to increased production and yields, it leads to the expansion of both cropland and pastures. For firms, a 1% increase in rural credit leads to a 0.02% increase in crop area and a 0.04% increase in pasture area.
• There is a significant disparity in the distribution of rural credit in Brazil. While PRONAF (the primary source for small farmers) represents 74% of the number of contracts, it only accounts for 14% of the credit amount and 16% of the area. In contrast, firms represent only 1% of producers but account for 29% of the credit amount and 85% of the area receiving credit.
• The impact of credit on production varies by the type of borrower; individual farmers experience increases in both production and productivity, whereas farming enterprises (firms) are not significantly affected, suggesting that firms are not financially constrained.
• Different uses of credit yield different outcomes: working capital and investment credits support both business expansion and improved yields for crops, while investment credit specifically increases cattle productivity (a 1% increase leads to a 0.19% increase in cattle productivity). Trade credit has no relevant impact on production or productivity.
• The document recommends that Brazil revise its rural credit policy to prioritize small farmers, as this aligns subsidies with national forest conservation efforts and addresses the needs of financially constrained producers.

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} }