Challenges of Rural Credit in Brazil

Access to credit is a significant challenge for Brazilian rural producers, hindering the growth and modernization of the vital agricultural sector. Although agribusiness represents 27% of GDP, many producers face significant barriers when seeking financing. Agricultural credit in Brazil is expensive and influenced by economic instability, inflation, and strict monetary policies.

Transaction costs in the credit market are high and difficult to measure. The gross financial wealth of the economy reached R$ 72.6 trillion in December 2022, with a consolidated balance of R$ 59.3 trillion, highlighting the complexity and costs of financial transactions in Brazil.

"Given these challenges, it is essential to promote solutions that can democratize access to credit and make the market more efficient. The adoption of financial technologies (fintechs) and the creation of new financial instruments, such as Agribusiness Receivables Certificates (CRA) and Investment Funds in Agribusiness Productive Chains (Fiagro), as well as other agribusiness-related assets, have the potential to transform the rural credit landscape in Brazil," said Tiago Piassum and Cristiano Oliveira.

Blockchain technology and asset tokenization are emerging as powerful tools to facilitate access to credit in the agricultural sector. Blockchain offers transparency and security in transactions, allowing smart contracts to automate and ensure compliance with financial agreements. Tokenization transforms agricultural assets into digital tokens easily traded on global platforms, expanding financing opportunities for rural producers. These technologies reduce costs and risks associated with traditional transactions, increasing liquidity and access to capital.

"Promoting a more facilitated and efficient environment for rural financing, driven by emerging technologies such as blockchain, will not only benefit producers but also improve accessibility for investors and contribute to sustainable development and economic growth in Brazil as a whole," they conclude.