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Credit risk modelling and sustainable agriculture: asset evaluation and rural carbon revenue

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  • Emmanuel Olatunbosun Benjamin

Abstract

Two important reasons for the limited access to formal credit experienced by rural small farmers in developing countries are information asymmetry and lack of collateral. For formal lenders, these conditions present a challenge to prudent risk management. Sustainable agriculture in sub-Saharan Africa may abate these challenges. This article extends Katchova and Barry's (2005) risk model to include environmental services cash flow in the asset evaluation of farms in Southern Africa. In the presence of falling land prices, future distance-to-default of carbon-certified smallholders would improve considerably with a default probability of approximately 40% as compared with that without certification.

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  • Emmanuel Olatunbosun Benjamin, 2013. "Credit risk modelling and sustainable agriculture: asset evaluation and rural carbon revenue," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 3(1), pages 57-69, January.
    • Handle: RePEc:taf:jsustf:v:3:y:2013:i:1:p:57-69
    DOI: 10.1080/20430795.2013.765382
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    Cited by:

    1. Jesu Raju Thomas & Jyothi Kumar, 2016. "Social performance and sustainability of Indian microfinance institutions: an interrogation," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 6(1), pages 38-50, January.
    2. Maria Carolina Rezende de Carvalho Ferreira & Vinicius Amorim Sobreiro & Herbert Kimura & Flavio Luiz de Moraes Barboza, 2016. "A systematic review of literature about finance and sustainability," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 6(2), pages 112-147, April.
    3. Kiros Tsegay & Hongzhong Fan & Hailay Shifare & Priyangani Adikari, 2021. "The role of small town in household livelihood diversification in Ethiopia rural areas," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(7), pages 230-241, October.

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