Study Shows That Increase in Rural Credit is Linked to Agricultural Production Growth

A study by Rivool Finance, a fintech based in Florianópolis (SC) that utilizes blockchain technology to tokenize agricultural receivables such as Rural Product Notes (CPR), reveals the influence of different credit models on the expansion of Brazilian agribusiness. The research, exclusively shared with EXAME, provides valuable insights into this dynamic.

The study analyzed 4,618 municipalities between 2013 and 2021, employing advanced econometric analysis using a vector autoregression model and panel data to explore the relationship between credit and agricultural growth.

The results indicate that a 10% increase in total credit volume is associated with approximately 1.8% growth in agricultural production. Specifically, a 10% increase in investment credit led to about 0.7% growth in production, while other types of credit, such as financing and marketing, showed no statistically significant impact.

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

Oliveira points out that public budgets have predominantly financed rural credit in Brazil. However, recent budget constraints and the limitation of resources from traditional financial institutions have created challenges for sector growth.

“The budget is limited, and public credit is highly regulated, with various restrictions. Even when seeking financing, the process is complex and involves several stages, from seeking resources from private banks to obtaining the necessary credit to finance and operate an agricultural business,” Oliveira told EXAME.

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

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 Agro-industrial Productive Chains Investment Fund (Fiagro), which opened the sector to both 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 registered 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 Agro 1, Agribusiness Receivables Certificates (CPRs) have seen remarkable growth in volume, reflecting the new market dynamics—the legislation created a favorable environment for the private sector, previously hindered by excessive government interference and lack of transparency, according to Rivool's study.

Despite these advances, the private rural credit market has yet to reach its full potential. In 2023, agribusiness accounted for approximately 24% of Brazil's Gross Domestic Product (GDP), and it 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 increases and input prices rise, the demand for credit also grows. Therefore, the agricultural sector's expansion and operation depend heavily on credit availability,” Oliveira emphasizes.

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

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

By Exame