The Role of Cooperatives in Rural Credit

This policy brief analyzes the role of credit cooperatives in Brazil's rural credit system, highlighting their ability to provide financial inclusion for small-scale producers, particularly during economic crises. It examines the structural relationship between cooperatives and commercial banks, the geographical distribution of credit, and the regulatory advantages that allow cooperatives to operate more efficiently than traditional banks in rural areas.

• Credit cooperatives experienced significant growth during a period of general economic decline in rural financing. While total rural credit volume fell by 14% in real terms between 2013/2014 and 2018/2019, cooperative lending grew by 51.3% in real terms, increasing from R$ 21.8 billion to R$ 33 billion. Consequently, the sector's aggregate market share rose from 11% to 17.5% during this period.
• Cooperatives serve as a critical channel for financial inclusion for small and medium-scale producers due to their lower average contract values and specific program participation. In the 2018/2019 agricultural year, cooperatives had an average contract value of R$ 88.2 thousand, significantly lower than the R$ 454.9 thousand average for private banks. Furthermore, 21% of cooperative funds were financed through Pronaf and 18% through Pronamp, compared to only 2% and 6% respectively for private banks.
• The proximity of cooperatives to rural producers reduces financial risks by lowering transaction costs and mitigating information asymmetry. This is achieved because borrowers are often members who must provide personal and property documentation, and local monitoring is enhanced by the fact that neighbors often belong to the same cooperative.
• There is a strong interbank relationship where commercial banks, especially private ones, use cooperatives to meet regulatory requirements for rural credit. Banks direct a percentage of demand deposits and rural savings to rural credit at controlled rates; they maintain some funds for their own clients and transfer the remainder to cooperatives for application.
• The geographical distribution of cooperative credit in Brazil is highly uneven and closely linked to agricultural production volume. High concentrations are found in the South, Central-west, and Southeast, with states like Rio Grande do Sul, Paraná, and Espírito Santo seeing cooperatives handle 25% to 35% of total credit. Conversely, cooperative credit represents less than 5% of lending in all Northeast states.
• Cooperatives focus more heavily on production costs than other financial institutions. In the 2018/2019 agricultural year, 72% of cooperative funds were allocated to production costs, compared to 59% for public banks and 43% for private banks. Within this category, funding was predominantly allocated to soy (33%) and beef (27%).
• Credit cooperatives enjoy significant tax and regulatory advantages over traditional banks. They are exempt from income taxes and the Social Contribution on Net Profits (CSLL) for 'cooperative actions' aimed at social objectives. Additionally, they are not subject to compulsory deposits.

APA

Assunção, J., Costa, D. R. D. M., & Souza, P. (2020). The Role of Cooperatives in Rural Credit. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/07/PB-The-Role-of-Cooperatives-in-Rural-Credit.pdf

Chicago

Assunção, Juliano, Davi Rogério de Moura Costa, and Priscila Souza. The Role of Cooperatives in Rural Credit. Climate Policy Initiative, 2020. https://www.climatepolicyinitiative.org/wp-content/uploads/2020/07/PB-The-Role-of-Cooperatives-in-Rural-Credit.pdf.

Wikipedia

{{cite report |last1=Assunção |first1=Juliano |last2=Costa |first2=Davi Rogério de Moura |last3=Souza |first3=Priscila |title=The Role of Cooperatives in Rural Credit |publisher=Climate Policy Initiative |date=July 2020 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2020/07/PB-The-Role-of-Cooperatives-in-Rural-Credit.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{assuno2020role, author = {Assunção, Juliano and Costa, Davi Rogério de Moura and Souza, Priscila}, title = {{The Role of Cooperatives in Rural Credit}}, institution = {Climate Policy Initiative}, year = {2020}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2020/07/PB-The-Role-of-Cooperatives-in-Rural-Credit.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }