A study shows that an increase in rural credit is associated with growth in agricultural production.

A study by Rivool Finance, a fintech based in Florianópolis (SC) that uses blockchain technology to tokenize agricultural receivables like Rural Product Notes (CPR), reveals the influence of different credit models on the expansion of Brazilian agribusiness. The study was exclusively shared with EXAME.

The research covered 4,618 municipalities between 2013 and 2021, utilizing advanced econometric analysis with a vector autoregression model and panel data to explore the relationship between credit and agricultural growth.

The results show that a 10% increase in the total volume of credit is associated with approximately 1.8% growth in agricultural production. Specifically, a 10% increase in investment credit generated around 0.7% growth in production—other types of credit, such as working capital and commercialization, did not show a statistically significant impact.

The research, part of Rivool Finance’s Market Review and led by Cristiano Oliveira, the fintech head of research and professor at the Federal University of Rio Grande, highlights a significant transformation in Brazilian rural credit.

Oliveira points out that historically, rural credit in Brazil was predominantly financed by the public budget. However, recent budget constraints and the limitation of resources from traditional financial institutions have posed challenges for the sector’s growth.

"The budget is limited, and public credit is highly regulated, with numerous restrictions. Even when seeking financing, the process is complex and involves several steps, from securing resources from private banks to obtaining the necessary credit to fund and operate an agricultural business," the fintech’s head of research told EXAME.

For the 2024/2025 season, the Ministry of Agriculture and Livestock (Mapa) announced the release of R$ 400.59 billion for corporate agriculture through the Plano Safra. For family farming, the authorized amount is R$ 76 billion. Despite the increase compared to the previous year, industry representatives warn that these amounts may not be sufficient to meet demand.

Private Credit in Brazilian Agribusiness

Since 2020, Brazil has implemented significant changes to expand access to credit for national agribusiness with laws 13.986/2020 and 14.421/2022, known as Agro 1 and Agro 2.

These laws represent a milestone in agribusiness financing. They introduced the securitization of receivables in foreign currency and created the Investment Fund in Agro-industrial Productive Chains (Fiagro), which opened the sector to national and international capital markets.

According to data from the Brazilian Association of Financial and Capital Market Entities (Anbima), released at the end of July, Fiagros recorded R$934.6 million in issuance volume in the second quarter of this year, a growth of 118.8% compared to the previous quarter.

Since the implementation of the Agro 1 Law, Agribusiness Receivables Certificates (CPRs) have experienced remarkable growth in volume, reflecting the new market dynamics—the legislation created a favorable environment for the private sector, previously hampered by excessive government interference and lack of transparency, says Rivool’s study.

Despite advances, the private rural credit market has yet to reach its full potential. In 2023, agribusiness represented around 24% of Brazil's Gross Domestic Product (GDP) and, for this and the coming years, will continue to demand large volumes of credit for all stages of production and investments in areas such as storage and pasture recovery.

"Agribusiness is essentially driven by credit, from purchasing inputs and pesticides to producing and selling products. As production grows and input prices rise, the demand for credit also increases. Therefore, the expansion and operation of the agricultural sector heavily depend on the availability of credit," Oliveira emphasizes.

For Rivool, in the short term, funds that pool investor resources to invest in agricultural assets are expected to gain prominence, attracting both national and international investors.

Moreover, according to Rivool, fintechs have the potential to democratize the rural credit market, reduce information asymmetries, and make the sector more accessible to producers and investors.