Description financing model: Direct Farmer Financing (Market)
Direct Farmer Financing (Market) involves pioneering banks providing loans directly to farmers, supported by catalytic capital through de-risking instruments or financial incentives to improve loan affordability and uptake
Applicability: Applicable to broad range of farmers and agri-SMEs that meet defined eligibility criteria
Considerations: Scalability depends on the availability of catalytic capital
Description of de-risking tool(s):
Guarantees: Third-party assurances (typically by public or development actors) to cover losses in case of borrower default, reducing perceived investment risk
Case study description:
The Banpará-Bio program was launched in 2021 by the Government of Pará to facilitate access to credit for small producers and family farmers, including cattle ranchers.
- Banpará, a state-owned bank, offers microcredit to rural producers ranging from US$1,000 to US$6,000 under favorable terms. This includes a repayment period of up to 3 years and a grace period of up to 12 months.
- These loans are earmarked for small rural producers, with a priority given to Indigenous peoples, quilombolas, and traditional communities. The credit can be used for a wide range of activities, provided they do not cause environmental degradation.
- Pará's Secretariat of Environment and Sustainability (SEMAS) backs these loans with a guarantee, enabling Banpará to offer credit for higher-risk endeavors without requiring traditional collateral.
- Emater-Pará, a public technical assistance company, ensures that the funds are used correctly and without causing environmental harm.
As of May, between US$9 million and US$10 million has been disbursed, benefiting over 1,000 rural producers.