Impact of financial inclusion on the local economy. The Financial Agriculture Program in Mexico

This paper provides empirical evidence of the impact on the value of agricultural production of a public guarantee scheme to promote private financing for family farmers: the Family Farming Financing Program (PROAF). The importance of finding the ideal channel (Savings and Loan Cooperative Societies, SOCAP) to provide financing to the underserved population is highlighted. To measure the impact, the staggered incorporation of the municipalities into the program is taken advantage of given the regional presence of the SOCAPs. We studied the period 2012-2020 and the implementation of the program that happens gradually between 2015 and 2020. We combined a series of administrative datasets on the presence of savings banks in each municipality and the value of agricultural production to use methods for studying events and differences in differences. Our main result indicates that Proaf has a positive impact on the value of agricultural production by almost 20 percent and on the value of livestock production by almost 6 percent. These results point to the economic importance of access to financing for small producers, especially women.