By Lise Alves, Senior Contributing Reporter
RIO DE JANEIRO, BRAZIL – Banks in Brazil will have to allocate approximately R$6 billion from rural deposits and savings to small farmers, announced Brazil’s National Monetary Council (CMN) on Thursday.
“The change will guarantee resources until the end of the harvest,” said the head of the Department of Regulation, Supervision and Control of Operations of the BC Rural Credit, Cláudio Filgueiras.
The resources will be used in the agricultural and livestock financing operations of the National Program for Strengthening Family Agriculture (Pronaf) and the National Program to Support the Medium Rural Producer (Pronamp).
The measure will be valid from February 1 to June 30, 2019.
According to Brazil’s Central Bank (BC), additional revenues was needed to cope with the increased demand for rural credit by family farmers this season.
Currently banks are currently required to allocate 30 percent of cash deposits and 60 percent of deposits in rural savings towards rural credit. In addition, institutions must use 35 percent of resources from Agribusiness Credit (LCA) for this type of credit.
With the change, the banks will have to allocate, in addition to these amount, another R$6 billion to Pronaf and Pronamp farming and livestock programs.
In addition, as of February 1st all funds obtained from LCAs will be borrowed at market-defined rates. According to officials, these rates are currently between 9.5 percent and 10 percent per year.
Until now banks were required to offer 35 percent of LCA credit at interest of 8.5 per year to small farmers.