The unequal allocation of PRONAF resources: which factors determine the intensity of the program across Brazil?

Abstract

Abstract The family farming sector in Brazil is an important player in the country’s economy, especially in poor rural areas., The government has created the National Program for Strengthening Family Agriculture (PRONAF) to stimulate the development of family farming in Brazil. It a credit program that offers loans at a subsidized interest rate. Previous studies have shown that wealthier farmers and more developed regions have more access to subsidized credit. Due to this apparently unequal allocation of PRONAF resources, the study aims to analyze, through econometric regressions and interviews with specialists, the underlying determinants for the unequal credit allocation across the municipalities in Brazil. Results indicate that wealth and knowledge of farmers are significant determinants of loan size, whereas municipalities that represent a high risk have received significantly fewer resources from PRONAF per household head. Thereby, we can conclude that PRONAF’s operations are not fulfilling their pro-poor objectives of targeting poor farmers and municipalities. Progress in infrastructure and institutions to reduce risks, enhancement of farmers’ qualifications and organization, better access to markets and agroindustry, and improvements in rural extension services are found to be essential to increasing the access to PRONAF’s credit.

Keywords

• family farming
• PRONAF
• rural loan
• credit access
• credit intensity