Rural Credit: How It Works and How Farmers Benefit

If you work with family farming, see how to get money to invest in your business Do you remember the school days, when you started studying economics, still in elementary school? In geography classes, one of the first topics we learn is about agriculture. This is the main economic activity in Brazil.

To ensure that agricultural producers maintain their activities, the government offers conditions through the so-called rural credit. Have you heard about it? Read this text to the end to stay on top of the subject.


What is rural credit?

What is rural credit?

Rural credit is an initiative that the government created to stimulate the development of this sector of the economy. What does that mean? That there is a budget to pay the expenses of the productive cycle of small, medium and large farmers.

In this way, people working in rural activities can apply for this credit and use the money to improve ownership, manufacture and sell products.

Rural credit was created to stimulate production, strengthen the sector and make more money circulating in agriculture. This gives people working in the context of family farming access to better working conditions.


Where does the money from rural credit come from?

Where does the money from rural credit come from?

The National Monetary Council (CMN) organizes the money to be invested in rural credit. The practical part is done by banks and credit unions, such as the Constitutional Fund departments in each region of Brazil. The amount of money that will be released depends on the budget for each year, that is, the amounts are not fixed. In addition, the rural credit budget must be part of the government’s Safra Plan.

The rules can also vary according to the year that rural credit will be released. Small and medium producers have special attention and easier rural credit compared to large producers.


What are the types of rural credit?

rural credit

Rural credit can be current, educational or special. Check out what each of these means:

Educational: In this modality, in addition to receiving credit money, you also receive guidance and technical assistance.

Educational credit is indicated for those who are starting a business and need to learn how to prepare work projects.

Chain: In this case, the producer receives only the money. This type of rural credit is more suitable for those who already work in the area.

Special: This rural credit is aimed at rural producer cooperatives or colonization and land reform programs.


What to do with the money from rural credit?

credit loans

If you apply for rural credit, you can use the money in the following ways:

Agricultural costs: Used to cover the costs of planting until harvest.

The amount you will receive, therefore, will be used to prepare the land, invest in seeds, monitor the growth process and bear the costs of the harvest.

Investment credit: Money is used to purchase durable goods or services. This means that you can use it to buy machines, tractors or build a shed, for example.

Marketing credit: Covers the expenses of the marketing phase. With this money, you can invest in packaging, logistics, among others.

Industrialization: The money is used for product manufacturing processes. It can be used, for example, for the production of juices, yogurts or jams.


What are the advantages of rural credit for small producers?

credit loans

Small producers participate in rural credit through Pronaf (National Program for Strengthening Family Agriculture). It establishes an annual interest rate according to the Selic rate. Interest rate? But doesn’t the government give that money to small farmers? No, money is not given, it is borrowed. That is why the name is rural credit.


How do I pay rural credit installments?

The amount of installments and the time you have to pay the debt depends on the purpose of the credit.

You must inform the institution that will release the credit how the amount will be used, according to what we explained about what to do with the money.


How to get rural credit?

How to get rural credit?

Rural credit is released directly to the farmer or through cooperatives and associations. Depending on the needs of your business, you may receive the money at once or in installments. Suppose you ask for credit to invest in agricultural costs in a corn production.

Usually, the deadline for harvesting is 100 days from planting. This means that you will be able to receive part of the money from the rural credit when you plant and another part when it is time to harvest. But this is just an example. It is good that you understand that everything depends on the government rules for the current year.

Check out the requirements that you must follow in order for rural credit to be released:

  • You cannot have a dirty name, that is, you cannot have the name of the SPC (Credit Protection Service);
  • You need to present a plan with the budget of how much you need and what you will do with the money;
  • You must prove that the rural area meets the recommendations and restrictions of agroecological and ecological-economic zoning. That is, your site, for example, must have the rural area documentation up to date;
  • Present the copy of the property registration;
  • Prove that the property tax is up to date;
  • Submit the rural property registration certificate;
  • Present the water grant, in case you need irrigation;
  • Depending on the state where you live, it is necessary to submit the environmental statement;
  • State that you are able to carry out agricultural or livestock activities.

What’s up? Are you ready to ask for rural credit? Be sure to check in your city which bank offers this type of service.

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