Rural financing plays a fundamental role in the development of agribusiness. With a variety of types of rural credit available, each adapted to the specific needs of producers, accessing these resources can be the key to sustainable growth and efficiency in the agricultural sector.
In this material, we will explore the different types of rural credit available in Brazil, their characteristics, conditions and how to facilitate access for producers.
Knowing the options is fundamental to making more strategic decisions in the sector. Read on and check it out!
What is rural credit?
Rural credit is a type of financing aimed at rural producers, cooperatives and companies in the agricultural and livestock sector. It allows farmers to obtain financial resources to invest in their activities, from production to marketing.
Rural credit is offered by various public and private financial institutions, such as banks, credit unions and development agencies.
The benefits of this type of credit include the possibility of technological modernization in the sector, improved cash flow for producers, sustainable development of agribusiness, among others.
How does rural credit work?
Rural credit is regulated by the National Rural Credit System (SNCR). Created by Law No. 4,595/1964, the SNCR is managed by banks and credit cooperatives, which operate under the rules established by the National Monetary Council (CMN).
Law No. 4.829/1965 consolidated rural credit, defining that the CMN should create operational rules covering the allocation and management of resources. These guidelines include criteria for the application of funds, control and priorities in the distribution of credit, as well as supplementation and refinancing programs.
The resources earmarked for rural credit come from various sources, reflecting the complexity of agricultural financing. Here are the main ones:
- Rural savings;
- Compulsory resources: bank demand deposits transferred to agricultural credit;
- BNDES;
- Agribusiness Credit Bills (LCA);
- Among others.
Main types of rural credit
The types of rural credit are classified based on the purpose and use of the resources.
Each type is designed to meet the specific needs of rural producers. Check out the 4 main types of credit below!
1. Funding credit
The purpose of costing loans is to cover the operating expenses necessary for agricultural and livestock production. It includes expenses for seeds, fertilizers, pesticides, labor, among others.
It is generally a short-term loan, intended to finance the production of the producer’s current crop.
2. Investment credit
The main purpose of investment credit is the acquisition of capital goods and infrastructure improvements, such as the purchase of machinery and equipment, construction of facilities and modernization of irrigation systems.
It is a medium- to long-term credit that seeks to increase production capacity and efficiency.
3. Commercialization credit
The purpose of commercial loans is to help with the purchase and sale of agricultural products, providing resources for storing and selling the harvest.
This type of credit can have varying terms, depending on the needs of the producer and the nature of the product.
4. Industrialization credit
Credit for industrialization is designed to support the transformation of agricultural raw materials into finished or semi-finished products, adding value to rural production.
It is generally medium to long term, adjusted to the nature of the investments and the implementation cycle.
Government programs and rural credit
One of the main credit mechanisms for rural producers is the Safra Plan, a federal government program aimed at providing resources to finance agricultural activity in Brazil.
The main sources of funding include public banks such as the BNDES and Banco do Brasil, constitutional funds, demand and rural savings deposits, the issue of LCAs and financial institutions’ own resources.
In all these sources, there is a level of legal refinement of the obligations that end up being complex or incompatible with the traditional agribusiness legal model.
The two main Safra Plan programs used by producers are Pronamp and Pronaf. The former can be taken up by medium-sized rural producers and aims to promote the sustainable development of rural areas through actions designed to increase production capacity, create jobs and raise incomes, with a view to improving the quality of life and exercising citizenship of family farmers.
Pronaf is aimed at family farming, with a focus on social development, subsidized interest rates and extended payment terms.
The Ministry of Agriculture and Livestock (MAPA) has earmarked R$400.59 billion for the 2024/2025 Safra Plan, 10% more than in the previous period. The amount earmarked for the Family Farming Safra Plan is R$14.8 billion.
However, the resources are insufficient. The cost of a harvest is around R$800 billion in the country and the Safra Plan only covers a portion of this amount.
Legal support to facilitate access to rural credit
We ended the last topic by talking about the inadequacy of the resources made available by government programs in the face of the growing demand for rural credit.
In other words, the credit limits available are not keeping pace with the sector. This is mainly due to technical issues and risk for lenders.
In addition, the informality present in most agricultural businesses is another obstacle to obtaining credit. In this sense, the legal structure, i.e. the transition from the status of an individual to a legal entity, opens doors to more opportunities for taking out credit in the financial system.
In order for farmers to migrate from an individual to a legal entity, they need to thoroughly analyze how their business works and map out the best options for their type of business.
Legal aspects can intimidate farmers, given the country’s legal and regulatory complexities and the particularities of their agricultural enterprises. In this sense, having legal support helps simplify the process and ensures that it is carried out properly and efficiently.
Want to know more? In the guide “Rural credit: how to facilitate o acesso para o produtor agrícola?”, você vai conhecer as possibilidades que podem ajudar produtores rurais e empresários do agro a superarem as barreiras burocráticas e obter crédito de maneira mais eficiente.
