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Emmanuel Olatunbosun Benjamin , Gertrud Buchenrieder 
Credit risk and ecosystem services: A review of small-scale emission certified agroforestry 
nnovative smallholder agricultural credit instruments used by financial intermediaries (both conventional commercial and microfinance intermediaries) must acknowledge the presence of climate change and environmental degradation, both of which threaten food production and food security in parts of Sub-Saharan Africa (Schrieder, 1997). Smallholder farmers usually source funds in order to smooth consumption, thereby preserving farm resources as well as investing in the farming business. Thus, access to credit instruments may also be linked to environmental resource management (Anderson, Locker, & Nugent, 2002). Despite certain improvements in the last three decades, total lending volume to smallholder farmers, especially female farmers, in Sub-Saharan Africa remains low (Kiptot & Franzel, 2012). Financially constrained smallholders without universal land property rights have been observed to exhibit adverse behaviors which are reflected in their improper natural resources and sustainability management strategies (Barrett, 2008; Johnston & Morduch, 2007). These behaviors point to motives and circumstances beyond those of just coping with consumption risks. The major challenges confronting agricultural lending in parts of Sub-Saharan Africa stem from issues related to imperfect credit markets. These cause high transaction costs and a lack of adequate and eligible collateral, often due to restricted land property rights (Havemann, 2011; Rodrigues de Aquino, Aasrud, & Guimarães, 2011). The lack of information on the character and business qualities of smallholder farmers in Sub-Saharan Africa is a hindrance to the credit evaluation process of financial intermediaries, which is reflected in the extremely high market transaction costs experienced by conventional lenders. Furthermore, assets which may minimize losses in the case of smallholder loan default usually have no value because they lack a market. To overcome today’s credit constraints faced by smallholder farmers, certain questions have to be raised. For instance, which instruments are available to financial intermediaries for identifying creditworthy smallholder farmers based on sustainable and environmental criteria in order to ensure business quality? Are there sustainable income schemes that guarantee smallholder farmers a long-term cash flow or physical collateral? This chapter explores whether small-scale emission-certified agroforestry could be the next innovation in smallholder lending instruments improving, among other issues, access to credit for smallholders and reducing transaction costs for lenders. 
Othmar M. Lehner 
Routledge Handbook of Social and Sustainable Finance 
Verlag / Institution:
Routledge International Handbooks