Can credit help small family farming? Evidence from Brazil

Abstract

Purpose The purpose of this paper is to evaluate the impact of a Brazilian rural credit program, The National Program for Strengthening Family Farming (PRONAF), on small family farming production. Design/methodology/approach The method is based on a quasi-experimental approach (propensity score matching) applied to 4.1m family farmers in Brazil. Findings Results show that farmers accessing PRONAF tended to be positively selected in terms of several observable characteristics, such as land size and agricultural practices. Moreover, PRONAF had positive and differentiated impacts on agricultural production. The impact was larger in the poorest region when compared to the regions characterized by intensive and commercial farming. Research limitations/implications The rural credit information was restricted to one crop year, making impossible to analyze the mid- and long-term impacts of the credit program on agricultural production. Practical implications The study provides some practical implications for policies of rural development. First, rural credit does matter for agricultural production of small family farmers. Nonetheless, since credit programs are large subsidized by the rest of the population, further studies are still needed the aggregate costs and benefits of these schemes. Results also revealed that PRONAF may have contributed to reduce regional inequalities, since the impact was larger in the poorest NE region. Originality/value This study provides a comprehensive analysis of how rural credit has impacted small-farm agricultural production, using large and representative data – the whole population of Brazilian family farmers.