Impact of a crop insurance mechanism on credit obtained by smallholders: evidence from “Proagro Mais” in Paraná

Abstract This research analyzes a public compulsory crop-credit public insurance program, Proagro Mais, which is one of the largest agricultural risk management programs in Brazil and is also focused on smallholder producers. In particular, this study assesses the influence of the program on the amount of credit obtained per hectare by smallholder corn producers in the state of Paraná, Brazil. The primary dataset is a comprehensive database of agricultural credit borrowers comprising 93.303 individuals. The methodology incorporates the propensity score matching (PSM) at the endline year, employing three distinct matching algorithms, and PSM at the baseline, coupled with the difference-in-differences method. The results indicate that the treatment had ambiguous effect on the treated, with reduced impacts when compared with the outcome variable means. This suggests that the control group may have employed agricultural risk management tools other than Proagro Mais to mitigate the effects of low production on the average credit per hectare. It should be noted that this research represents one of the few impact evaluation studies on crop insurance in Latin America.