Ecological Farming and Ecological Finance:

Tandem Strategies for Smallholder Climate Resilience

by Erin D. Matson


December 10, 2017  |  SIS-620-005: Global Climate Change  |  Professor Kristen Hite





Climate change is a literal, existential threat to millions of people, as sea level rise, economic disruption, and extreme weather put lives and livelihoods at real risk. At the same time, though, climate change presents a discursive opportunity for social activists to reframe their calls for equity and justice in light of this multidisciplinary ‘wicked problem’ (Levin et al. 2012). As a multi-faceted and multi-scalar problem, climate change demands the integrated response of social, legal, technical and scientific, economic and political realms. Layering a climate-focus onto existing sectors has become the de rigueur response to this all-encompassing challenge. Thus, the climate-hyphens proliferate: “climate-informed development” from the World Bank (Hallegatte et al. 2015); “climate-smart agriculture” promoted by the Bank and the United Nations Food and Agriculture Organization (FAO) (World Bank 2007; FAO 2010)); “climate-aware” and “climate-proofed” risk assessment, public health management, conservation, fisheries management, and many more. But how effective are these tweaked disciplines at truly engaging with the root causes of global climate destabilization?

As a problem without borders, climate change presents stark challenges for governance systems at every level while revealing, in stark relief, many of the underlying fragilities and inequalities of the global economic system. Through its differential impacts, climate change exacerbates existing disparities in access to resources and political power across and within nations. Among the most marginalized in terms of resource access and climate vulnerability are smallholder farmers. Though the definition of “smallholder” varies from country to country, based on the context of overall landholdings and the commercialization of the agriculture sector, 2 hectares or less is broadly accepted as a proxy for accounting purposes. Thus, Lowder, Skoet, and Raney (2016) find that approximately 84% of the world’s farms are less than 2 hectares, cultivating only about 12% of total farmland. Yet, these farmers produce about 30% of global food commodities, primarily in diverse landscapes (Fanzo 2017, e15). Smallholder farmers are often, but not always, subsistence growers who depend on a thin margin to sustain their families. On average across Latin America, South Asia, and Sub-Saharan Africa, farm size has decreased from 1960 to 2010, increasing the strain on small landholdings to provide for farmers’ families (Lowder, Skoet, and Raney 2016, 22). Despite the inverse land-productivity relationship – the observation that smaller farms tend to have higher per-hectare yields than large farms (Lowder, Skoet, and Raney 2016, 26) – smallholders often lack the access to resources or knowledge that would maximize their earning or production potential.

In the face of risks from climate change, as well as enduring poverty, international institutions commonly advocate for a “get big or get out” response for smallholder farmers in developing countries. Subsistence farmers with “profit-potential” should expand to commercial-scale production to achieve efficiency and profitability, they say, while growers without that potential should transition to other economic sectors for employment (S. Fan et al. 2013). One tool that is often proposed to help farmers make either transition is microfinance, often in the form of lending to invest in capital-based productivity gains or transition assistance for livelihood diversification. Microfinance, innovated by Muhammad Yunus through Grameen Bank, has come to typify decentralized, small-scale solutions to problems of resource access for marginalized communities.

Despite its innovative model in bringing financial resources directly to the poor who are systematically excluded from commercial finance systems, microfinance arguably does little to reform those same systems that create structures of inequality. Even as microfinance interventions seek to help smallholder farmers improve their resilience to the effects of climate change, microfinance itself merely serves to reinforce the structure of capitalism and consumption that have led both to climate change as we see it, and the existing historically contingent inequalities across and within nations.

This paper explores the role of two distinct movements for social change – agroecology and green microfinance – as they attempt to address the global problem of climate change at the micro-level. Through this paper, I seek to answer the questions: Is there a role for finance, and microfinance in particular, in creating true climate resilience for smallholder farmers? What would a holistic, economic and agroecological response to smallholder climate vulnerability look like? Are financial systems, which are based on the profit-motive, compatible with an agroecological worldview based on regenerative and self-sustaining biophysical and social systems? To begin exploring these questions, I first discuss the key terms of vulnerability and resilience in a climate context. I then present the two dominant institutional responses to smallholder farmers’ biophysical and economic climate vulnerability: climate-smart agriculture and (green) microfinance. Finally, I consider holistic alternatives to these frameworks: agroecology and ecological finance. I conclude with a discussion of possible pathways to operationalize ecological finance under the United Nations Framework Convention on Climate Change (UNFCCC) and the international community’s commitment to mobilize $100 billion of climate financing by 2020.




The Intergovernmental Panel on Climate Change’s Working Group II defines vulnerability as “the propensity or predisposition to be adversely affected” by the effects of climate change (Burkett et al. 2014, 179). This vulnerability is not just a function of geography or “biophysical” vulnerabilities like a direct dependence on ecosystems for one’s livelihood; rather, climate vulnerability is the product of intersecting marginalizations, whether social, economic, cultural, political, or institutional (IPCC 2014, 6). Poverty is an intersectional state of marginalization that exacerbates climate vulnerability, as poor people tend to lose proportionately more of their assets during natural disasters or years of crop failure than wealthier people (Hallegatte et al. 2015). Part of this is as a function of exposure: the poor have a higher proportion of their assets in real, material objects as opposed to banked assets, thus making those assets subject to physical destruction. In addition, the quality of these physical assets tends to be lower – for example, wooden shacks versus brick homes – making them more susceptible to loss and damage.

Smallholder farmers are among those who may be especially vulnerable to climate change due to both physical and social factors of exposure and sensitivity. In terms of social exposure and sensitivity, smallholder assets are more subject to loss due to less access to insurance than commercial farmers or more wealthy members of society (Hallegatte et al. 2015, 11). In addition, they tend to have less access to traditional means of finance, governmental social safety nets, or remittances from relatives abroad (Hallegatte et al. 2015, 142). In terms of biophysical vulnerability, poor farmers stand to suffer increased losses as a direct result of climatic change. Agriculture is one of the livelihood activities that is most exposed to changes or extremes in weather; rainfed agriculture, for example, would be particularly sensitive to incidences of drought. Climate impacts on production will be geographically differentiated. As temperature and precipitation impacts will vary by region, and the magnitude of carbon dioxide fertilization differs for crops primarily grown in different regions, yield effects may range from slight increases in northern latitudes to drastic declines in tropical regions (X. Fan, Fei, and McCarl 2017, 2). However, climate change is not just characterized by an increase in average temperature but also by an increase in extreme weather and variability – hence the alternative name “global weirding” (Hayhoe 2016). These extremes will likely counteract a number of positive yield responses as natural disasters become the norm, not the exception. In addition, climate change will exacerbate the trend of declining soil fertility and degradation in many parts of the globe (Basche et al. 2016).



Building resilience is the conceptual answer to the problem of vulnerability. Deriving from ecology and the idea of ecosystem’s capacity to absorb and respond to shocks, resilience “describes the ability of a system to respond to disturbances, self-organize, learn, and adapt” (Burkett et al. 2014, 179). More often, resilience is described as  “a positive quality of systems that can capably withstand, or recover from, external shocks” (Taylor 2017, 10). The term has been applied at a variety of scales, as the imprecision of the word “system” allows; the farmer, the household, or the community may be resilient; as may the crop, the farm, or the entire food system (Taylor 2017, 10). Though the dominant discourse of resilience revolves around how to operationalize it, the question of scale is a critical pre-requisite to designing and implementing solutions.

Resilience at one scale may depend on sacrificing “redundancies” at a lower level. On the farm, resilience is commonly talked about as an attribute of specific crops; agricultural consultants promote the use of “drought-resistant,” “pest-tolerant” or “salt-resistant” varieties as a response to observed and expected stressors. However, at the farm level, one of the best strategies for resilience is diversification. The basic notion of diversified resilience depends on the logic of redundancy (Taylor 2017, 11), such that the ability of the farm to absorb and recover from shocks may come at the expense of losing one or more crops completely. Growing a wide variety of crops, each of which may thrive under slightly different conditions, ensures that, no matter how the weather turns out, at least some crops are likely to survive and a few to thrive. However, if for example the farmer decides to grow only drought-resistant crops, they are setting themselves up for failure if, for example, floods hit rather than drought. Thus, when a farmer focuses on resilience at the crop level, they make the farm system overall less, not more, resilient. Agrobiodiversity, in this way, becomes the foundation for farm-level climate resiliency.

Expanding beyond the farm level, the entire food system as a socio-ecological construct depends on internal diversity to maintain stability under different circumstances. Though resiliency has come into vogue as a concept in the context of climate change, in fact the global food system has displayed remarkable resiliency, at the macro level, throughout the 20th and into the 21st century. Yes, there have been a number of crises, from the 1980s farm crisis in the United States to the global food price crises of 2008 and 2011. However, the global food system managed to recover from each of these crises. Arguably, the global food system has not succumbed to true crisis in the face of an external shock in decades. The incidence of famine has sharply decreased since the early 20th century, while in aggregate the number of the world’s hungry has declined (de Waal 2017). At the macro level, our food system, based largely on commodity grains, industrial production, and international trade, has remained relatively “stable.” And yet this stability hides the underlying mechanics of resilience at this scale. Diversity is, again, the key, as global food system resilience comes “at the expense of subordinate social groups within it who cushion the impacts of environmental” and economic change (Taylor 2017, 10). Think of the family farmer who lost their land to debt in the 1980s, only to see it bought up by a corporate grower; the landless farmworker who loses their job as a farm mechanizes; or the female farmer whose tenure rights are ill-defined or ignored in the face of an encroaching palm oil farm. Like the crop that fails in the drought while another variety flourishes, these marginalized food producers are sacrificed in the relentless march of global food system resilience. Hence, resilience is not just a biophysical or even an economic question, but also a political one. As Taylor (2017) explains, resilience cannot serve “as an abstract normative goal that applies uniformly across social categories;” we must consider “resilience of what or whom for what purposes and at whose expense” (10).




There are two existing, dominant frameworks meant to address the problem of smallholder farmer climate vulnerability: climate-smart agriculture and (green) microfinance, neither of which, I argue, address the political question of building resilience. Like the other iterations of layering a climate perspective onto an existing tool, these frameworks do little to question the underlying mechanisms of marginalization. “The assumption is that, once placed on a carbon-neutral footing” – or a climate-smart or climate-informed one – “economic systems can carry on much as before” (Spratt 2015, 154). The two frameworks conceptually segment vulnerability into two realms: the biophysical vulnerability of agricultural production, and the economic vulnerability of reduced resource access.

On the agricultural side, to mitigate “biophysical” realms of vulnerability, the World Bank and the FAO have developed the “triple-win” concept of “climate-smart agriculture” (CSA). Meant to act as a framework for implementing and evaluating agricultural practices, rather than a set of practices in itself, CSA describes an approach that aims to increase productivity, reduce greenhouse gas emissions, and “build resilience” simultaneously. Though on their face, each of these goals is admirable, the lack of precision in defining and operationalizing these “wins” serves to undermine the efficacy of the framework.

Addressing the economic aspect of vulnerability, microfinance attempts to mitigate the problem of resource access for the “unbanked” and “underbanked,” stepping in as a means for smallholders to access credit, insurance, etc. in the absence of commercial financial services. The World Bank’s 2014 report on global financial inclusion found that 38% of all adults did not have an account with a formal financial institution or a mobile money account; in developing countries, 46% of adults did not have an account (Demirguc-Kunt et al. 2015, 4). Studies have shown that simply having access to a bank account increases overall savings while allowing farmers in invest in their land’s productivity. At the same time, financial inclusion, including access to credit, is positively associated with increased consumption levels, a typical measure of quality of life improvement (Demirguc-Kunt et al. 2015, 2).

As a means to connect rural households to these benefits while commercial financial institutions remain out of reach, microfinance has had astounding success in proliferating across the globe. Microfinance institutions (MFIs) in aggregate have over 100 million poor clients and provide not just typical financial services like loans, savings, insurance, and payment mechanisms, but also “complementary services” like skills trainings, agricultural extension services, and workshops on health and nutrition (Haworth et al. 2016, 37). As of 2009, the global assets of MFIs totaled $38 billion, measured in outstanding personal and small-business loans (Spratt 2015, 157). Green microfinance builds on this base of penetration in developing countries to tie traditional microfinance interventions in with “climate-informed development” goals (Hallegatte et al. 2015). As a recent integration of microfinance and climate change action, green microfinance is a nascent field that requires more investigation to define its theory and scope of action (Moser and Gonzalez 2016, 249). Moser and Gonzalez (2016) make a compelling case for why microfinance institutions (MFIs) should engaged with climate change action at all, based on a concern for their own institutional viability:

Put simply, natural disasters, declined crop productivity, increased incidence of pests and tropical diseases, water scarcity, more frequent instances of climate extremes—long-lasting droughts, torrential rains, flooding, hurricanes—as a result of global warming are likely to endanger clients’ health and their asset base—homes, crops, equipment, and livestock—and, ultimately, affect both directly and indirectly the financial performance of a number of MFIs. (Moser and Gonzalez 2016, 243)

In addition, there is a practical case for MFIs to act as the vehicle for climate resilience interventions. MFIs have achieved a global reach into underserved rural areas, connecting to poor clients whose financial vulnerability tracks with an increase vulnerability to climate effects. These pre-existing networks, relationships, and knowledge of client needs give MFIs insight and experience into the kinds of individual financial interventions that are considered pre-requisites to climate resilience (Haworth et al. 2016, 38).



Each of these approaches address the symptoms of vulnerability without explicitly challenging the systems of consumption and inequality that give rise to that same vulnerability. In fact, by claiming to reduce vulnerability but in fact increasing it through “technical fixes” like improved seed, targeted fertilizer, microloans and structured savings accounts, CSA and (green) microfinance serve to reinforce the structures of precarity that they claim to address.

CSA discursively grows out of the “sustainable intensification” imperative promoted by the FAO and other organizations, which is justified by a projected increase in food demand. The demand driver is two-fold – global population is expected to increase to 9.8 billion by 2050 (UN 2017) while rising average incomes propel dietary trends toward increased meat and dairy consumption. However, as Hunter et al. (2017) revealed in a recent analysis, common calls to double food production by 2050 are based on several misinterpretations of a 2011 study by Tilman et al. and a 2012 FAO report. First, and most crucially, both Tilman et al. and the FAO used a 2005 baseline for their global food demand projections, which subsequent authors have ignored in favor of using an ever-changing “today” as the baseline. This error then masks production gains over the last decade. Additionally, single-minded focus on production to meet increased demand ignores distributional problems inherent in the global food system, including the problem of massive food waste and the use of cereals to supply upper income countries and classes with grain-fed meat while almost 800 million people worldwide suffer daily calorie deficiencies (Hunter et al. 2017, 4).

The framework of CSA, however, exists firmly within this false narrative of doubled food production as the answer to projected food shortages; it engages with climate change only as a technical challenge to be overcome, rather than as a political or moral question. Once again CSA’s claim to build resilience raises the question of scale: CSA deals primarily with farm- and field-level climate impacts and responses. As a governance framework, CSA does not explicitly promote any particular type of practice like organic, industrial, or conventional; rather, it divorces discrete practices from their contexts and judges them on the triple-win criteria of intensification, adaptation and mitigation. Further, as Taylor (2017) points out, practices can meet these criteria merely by “progressing” towards an ill-defined end: if a practice simply makes a farm “more” productive, “increases” adaptation or “reduces” its greenhouse gas footprint, then the practice counts as “climate-smart.” Nevermind the actual climate impact of the practice or how it perpetuates the status quo. An industrial commodity-producing farm may still contribute to climate change through nitrous oxide emissions from chemical fertilizers and subject the farmer to the whims of global food prices while supplying feed for methane-producing livestock; but if the farmer implements no-till, that is a CSA practice. As Taylor notes, the CSA framework “ignores how climate-smart production practices can be used to sustain climate-stupid consumption practices” (2017, 2).

Similarly, microfinance claims to address resource access issues, but in so doing it posits integration into global commodity chains as the solution to economic marginalization. Even as the classic approach to microfinance downplays the profit-imperative of most investment schemes – “the main aim is to maximize development impacts, with financial sustainability being necessary to ensure that they can continue to do this” (Spratt 2015, 158) – microfinance interventions are commonly framed as investments in a farmer’s productivity for economic growth, rather in their quality of life or other measures of success (Fan et al. 2013). Studies have also shown mixed results for farmers with microfinance: the small scale of available loans may not be enough to help farmers transition to the next stage of operations that they are aiming for, leading to borrowing from multiple lenders and subsequent overextension and default (2013, 10).

Though green microfinance attempts to address some of traditional microfinance’s shortcomings, including adding a climate focus and dealing more directly with the social determinants of vulnerability, once again there is a shift in the scale of resilience that limits consideration of the individual. As noted above, Moser and Gonzalez (2016) highlight that MFIs have an inherent interest in proactively incorporating climate change into their lending and outreach practices because climate change’s effects will undermine their bottom line. Protecting their borrowers from climate adversity becomes, then, a means of “secur[ing] and protect[ing] their [own] assets” (Moser and Gonzalez 2016, 244). Through incorporating climate change concern into microfinance interventions, green microfinance becomes concerns with the viability of the MFI itself rather than its clients. This process of “climate-proofing” microfinance refers not to making clients invulnerable to climate effects, but rather to designing MFIs’ investment and insurance portfolios so as to withstand loan defaults or mass savings withdrawals by clients; thus, the scale of resilience is once again shifted up the chain and away from the smallholder whom the MFI claims to empower.



What, then are the alternative modes of response to smallholder climate vulnerability? At a minimum, any holistic engagement with the social aspect of vulnerability, in addition to its biophysical and economic nature, must deal with questions of power. Therefore by definition, the proper tools will be political, not technical, in nature. Agroecology presents itself as one such political tool dealing with the problems of inequity and unsustainability in the food system.



Agroecology as defined by Francis et al. is “the integrative study of the ecology of the entire food system, encompassing ecological, economic and social dimensions” (2003, 100). As such it provides a holistic alternative to climate-smart agriculture’s narrow focus on production techniques. Though agroecology does explicitly advocate for environmentally sustainable agricultural production at the farm level, it draws on ecology’s engagement with ecosystems thinking to posit the entire food system as an integrated and integral subject of consideration, from the field to the market and beyond. Even as agroecology casts this wide net, it simultaneously advocates for consideration of place and localized biodiversity as key features of a stable food system. Conceptually and in practice, agroecology draws upon traditional and peasant agriculture, prioritizing efficient use and re-use of natural resources while drawing upon generations of place-based knowledge.

More than a mere agricultural framework, agroecology is a “people-centered and farmer-centered process of agricultural innovation and rural development” (Brescia 2017, loc 272). It moves beyond technical fixes for climate vulnerability to engage farming communities in their quest for cultural, economic, and social sustainability. A key concept upon which agroecology draws is the multifunctionality of agriculture, or the idea that agriculture serves a variety of social and cultural purposes beyond its economic role through food production (Van Huylenbroeck et al. 2007). Brescia (2017) lists several benefits of ecological farming for smallholder family farmers, including “food production, income generation, employment, cultural maintenance, environmental services, biodiversity, and resilience” (loc 328). Each of these functions of agriculture serves a critical role in maintaining vibrant rural communities, such that a focus on one, like production, to the exclusion of others undermines the stability and resilience of the entire system. Thus, an agroecological approach to smallholder climate resilience recognizes that biophysical aspects of vulnerability are only part of the larger context that includes the actions of neighbors and the support, or lack thereof, of agricultural policies. For example, a study of agricultural resilience in Central America after Hurricane Mitch found that, while agroecological farms suffered significantly less soil erosion and degradation than conventional farms, they fared just as poorly when affected by erosion events from farms upstream or or up the hill from them (Brescia 2017, loc 787). Horizontal scaling of agroecology, one part of “scaling up” that Brescia (2017) outlines in his book, recognizes that individual farmers cannot achieve “resilience” without working to share knowledge and practice from farmer-to-farmer in their communities.




Can the tool of microfinance be incorporated into agroecologically building climate resilience? Agroecology is grounded in a worldview of food sovereignty that is deeply skeptical – if not downright hostile – to capitalistic economic models. Meanwhile, microfinance is most often practiced today as a for-profit investment system that derives from a capitalistic model of economic “growth” based on speculative gains (Haldar and Stiglitz 2016; Mader 2015). The inherent tensions between a regenerative, agroecological system and a capitalist financial system based on competitive accumulation cannot be easily resolved – if they can be reconciled at all.

As Spratt (2015) explains in his discussion of the role of finance in enabling ‘green’ transformations, finance is not a neutral tool; the scope and type of financial support for transformative processes is limited by the investor’s required return on capital, and the ‘maturity,’ or timescale required for that return (153). In theory, microfinance attempts to limit the role of speculation in lending by extricating the borrower-lender relationship from commercial financial systems and decoupling from commercial interest rates. In practice, however, MFIs perpetuate debt traps for their borrowers as a push for institutional expansion and scaling up farm productivity leads borrowers to take on new debts to pay back original loans (Mader 2015, 172). While this state of perpetual debt increases borrowers’ financial precarity, it allows MFIs to maintain a steady rate of expansion, as long as borrowers do not default. Thus, the MFIs’ interest in maintaining its institutional viability becomes decoupled from its client’s best interests.

The case of SKS Microfinance and India’s 2010 microfinance crisis illustrates the hazards of using a financial tool to achieve the social end of poverty alleviation. Modelled after the success of Bangladesh’s microfinance model, SKS Microfinance was founded in India in 1998. The organization was well-established to capitalize on a global “gold rush” for microfinance as investors responded to the “good news” that microfinance “was an effective remedy for poverty” (Mader 2015, 161). In its rush to expand, SKS sacrificed previous MFIs’ focus on building social capital in favor of “assembly line” microfinance: “a universal formula that could be applied mechanically irrespective of specific social conditions” (Haldar and Stiglitz 2016, 468). The pending crisis came to a head in the state of Andhra Pradesh, where 83% of farmer households were indebted in 2003, compared to only 48.6% of farmers nationally (Mader 2015, 165); and average household debt in the state was almost 9 times higher than the national average (Haldar and Stiglitz 2016, 463). This expansion of household debt tracked with a breakdown in traditional social support systems that led to a “privatization of risk” for farmers (Mader 2015, 165). Ironically, rather than build social capital, MFIs in this case sought to profit from its degradation. Furthering the irony, the 2010 crisis was directly precipitated by extreme weather – droughts and floods – that struck the state in 2009. As farmers were forced to default on their loans in the thousands, MFIs’ lost their basis of viability, and the crisis spread throughout the country (Mader 2015, 191). Rather than building natural disaster resilience, microloan debt left farmer-borrowers with few options after their source of income was destroyed; tragically, many turned to suicide in their desperation. The SKS microfinance model relied on poor farmers to continue selling their labor for income. When that revenue stream suffered an inevitable disruption, the façade of the whole system came crashing down.

As a foray into “inclusive finance,” green microfinance would seek to adjust traditional microfinance practices that can perpetuate these debt traps. For example, Moser and Gonzalez (2016) promote the potential of MFI-sponsored micro-targeted insurance schemes like index-based insurance to reduce poverty traps after natural disasters (244). These insurance plans – which trigger payouts based on local indicators like extreme weather or flooding rather than costly individual loss assessments – could overcome the cost barrier of risk mitigation for small-scale diversified farmers. Despite the potential of these and similar risk-reduction mechanisms, green microfinance at its best supports only a “light-green” transformation of the global economy – one characterized by reduced intracountry wealth and income inequalities and smaller returns to capital, but which is still fundamentally recognizable to the current financial system. Thus it represents an “evolution rather than [a] revolution” of the role of finance in addressing climate vulnerability (Spratt 2015, 161).



Is there, then, a role for microfinance in agroecological responses to climate vulnerability? Though both traditional and green microfinance lack a clear integration with questions of power and reinforce economic systems based on globalized commodity chains, unconstrained consumption in the global north, and accumulation by dispossession (Harvey 2004) from developing to developed countries, it would be premature to dismiss microfinance completely as a possible tool for improved smallholder climate resilience. The proliferation of MFIs, and the individualized client relationships that microfinance builds when it is well-done, makes MFIs well-poised to enact the kind of decentralized, diverse, place-based resilience interventions that an agroecological approach demands.

Traditional micro-finance interventions are developed and implemented as top-down solutions to perceived needs amongst generically-conceived “subsistence” or low-income farmers, with limited customization of these products for individuals (Haworth et al. 2016, 40). However, a greener microfinance would respect the farmer-centered logic of agroecology (Montenegro de Wit 2017) and engage farmers themselves in the design and implementation of innovative products and services for mitigating climate risk (Haworth et al. 2016, 9). Just as ecological farming communities come together to share and innovate in their growing practices, farmer-led community microfinance design could lead to more effective interventions. In response to recent microfinance crises, many MFIs are already reengaging in the process of building social capital and social trust, beyond the mere provision of financial assets (Moser and Gonzalez 2016, 242). Through the alternative nature of the microlending relationship, lenders can invest more time and energy in understanding the borrower’s unique challenges and constraints; while the borrower is introduced to formalized structures of obligation and new forms of institutionalized responsibility. This groundwork, of strengthening social ties and establishing expectations of reciprocity, is a critical prerequisite to well-functioning agroecological farming communities.



Both microfinance and agroecology envision a self-sustaining future for smallholder farmers. Part of the premise of microfinance as it was initially implemented by Grameen Bank is that a small investment in capital (in the means of production) will allow borrowers to increase their earning potential; given a critical mass of such investments, they will enter a phase of self-sustaining economic viability (Mader 2015; Haldar and Stiglitz 2016). The purchase of a cow or a mechanical seeder becomes the regenerative source of new value, once the initial hurdle of access is overcome.

Similarly, agroecology’s philosophical foundation is its very capacity for regeneration, based on natural, closed systems of perpetual recycling and reuse. Just as agroecological systems rely on natural processes for food production, their associated social systems, based on community trust and interdependence, regenerate and reinforce themselves through iterative practice. However, there is a hurdle in transitioning to agroecological practice, both in the farm system and the social system. In the farm system, there may be a need to provide an initial investment of material from outside the system, due to a given farm’s history of extraction, dispossession, and degradation. As a baseline, a farmer may need to purchase or acquire seeds or saplings to establish new crops. The initial investment of labor, to establish these crops or to adjust the landscape to establish conducive conditions, will need to be supported by outside funds, since the farm will not be producing yet.

In tandem, the social system may require outside investment. Farmers who are not practiced in the art of agroecological growing will need to learn from their neighbors; they may also require financial support from their community in the time of transition. However, communities that have not practiced these type of ecologically-oriented agricultures before may not have the base of trust and connection that is needed for the type of social support that enables those agricultures. In the same way that the farming practices require an initial investment, so too may the community need an investment in social capital formation to transition to a supportive, vibrant, and innovating farming community. The joint-liability model of early microfinance can serve as the microfinance equivalent of agroecology’s campesino-a-campesino (farmer-to-farmer) knowledge-sharing networks. Based on a process of trial-and-error, the original Grameen I model of lending relied on ‘peer-monitoring’ among small groups of five or so lenders, whose individual ability to borrower was tied to their group members’ fulfillment of repayment obligations (Haldar and Stiglitz 2016, 461). Even as Grameen transitioned to an individual-lending model – known as Grameen II – the social norms they had established through joint-liability maintained high expectations for performance, and loan-repayment rates stayed as high as ever (462). Other MFIs like SKS in India ran into trouble due to a disconnect with microfinance’s essential foundation as a tool for social, not just financial, capital.



A greener microfinance – which could be more holistically envisioned as “ecological microfinance” – would be concerned with enabling farming communities to make a transformative “jump” (Tomich et al. 2011, 211) into an entirely new farming and economic system, divorced from the competitive accumulation logics of neoliberal capitalism. Fankhauser and McDermott (2016) outline three criteria by which measures to increase resilience can be considered transformational: “(1) the measures are pursued at a large scale; (2) they rely on novel approaches and tools; or (3) they involve deep structural changes to economic activity and/or location” (8). Ecological microfinance has the potential to meet each of these criteria. Though microfinance has stumbled with scaling its impact in the past, recent scholarship has renewed the focus on the social basis of success. If ecological MFIs were to align themselves with existing agroecological farmer-to-farmer networks, tapping into the farmer-led logic of innovation that these networks promote, their capacity to design and implement decentralized, individually-tailored resilience interventions would dramatically increase. Such an integration of farming and finance networks would also qualify as a novel approach under Fankhauser and McDermott’s second criteria. Finally, structural change would have to be informed by farmer needs, but would likely involve financial support for the multifunctionality of agriculture – its role in social, cultural, ecosystem, and employment support – rather than merely its (food) productive potential.

The idea of incorporating a political lens onto finance and environmental monetization is not entirely new; Kallis, Gómez-Baggethun, and Zografos (2013) present criteria by which environmental conservation schemes can be judged for their mitigating or exacerbating effect on power asymmetries, wealth inequality, and environmental degradation. They propose that any intervention be judged ex ante by whether it will improve current environmental conditions, reduce financial and political inequalities, promote alternative (non-monetary) models of valuation, and maintain unfettered access to public resources (i.e. refrain from further enclosing the commons) (Kallis, Gómez-Baggethun, and Zografos 2013, 100). It is precisely these types of criteria by which ecological (micro)finance must constrain itself if it is to fully replace the profit-motive of financial investment with a concern for transformational, multiscalar climate resilience. Speaking broadly, ecological finance would seek, first, to integrate social dimensions of vulnerability into the design of its interventions – primarily by building social capital; second, to transform local economies by enabling locally-adapted alternative economic models; and third, to frame the funding to ecological practices as an investment in farm-level and community-resilience and productivity beyond the mandates of financial returns on investment and short-term returns.




Though agroecology relies on place-based considerations of need, international discourse plays a critical role in catalyzing the global adoption of new ideas. In addition, local practitioners often rely on international norms to support and justify their movements for change at the national level. However, the challenge of scaling ecological finance faces many of the same hurdles that agroecology has thus-far faced in increasing its “verticality” (Brescia 2017). While farmer-to-farmer knowledge sharing has had resounding success, “pathways to transform apparatuses of the state, civil society, and markets are more contingent and challenging to foresee, plan for, or replicate” (Montenegro de Wit 2017, 1187). As competing frameworks for climate action jostle for discursive space on the international stage, it is critical that truly transformative approaches like ecological finance fight for an equal audience alongside hybrid, institutionalized mechanisms for incremental change.

The nature of international negotiations around climate action, which nominally give every sovereign nation equal voice in the proceedings, can have particular benefits and drawbacks for introducing innovative ideas. On the one hand, the right of every nation to make their voice heard means that all it takes is one country to embrace an approach like ecological finance, and it will be logged in the minutes of the annual Conference of the Parties (COP). However, on the other hand, the sheer volume and voices and issues at play creates a strong normative incentive for countries to mainstream their discourse. For fear of getting drowned out, small nations would often rather join forces to advocate for incremental change rather than isolate themselves as radical outliers. As such, the prospects for near-term global action are slim.

However, we have seen the legitimizing effect of one small voice advocating for a new idea at the level of international discourse. Such was the case of “loss and damage,” a concept for which Vanuatu laid the seed in a 1991 proposal to the Intergovernmental Negotiation Committee, the precursor to the UNFCCC (Roberts and Huq 2015, 149). That initial germ of operationalizing equity made its way into the language of the UNFCCC 17 years later, at COP13, through the Bali Action Plan, and most recently it led to the establishment of the Warsaw International Mechanism for loss and damage at COP19. Though the pace of change may be exceedingly slow, the loss and damage example demonstrates that considerations of equity need not be completely abandoned if at least one advocate is willing to make their case.

As nations work toward realizing their $100 billion annual climate finance commitment by 2020, it is imperative that financial interventions in the name of climate mitigation or adaptation should not exacerbate the very problem that the international community, under the UNFCCC, has convened to address. Arguably the need for an ecological lens to financial interventions is mandated by UNFCCC language around the finance mechanism, which explains that finance should be considered “in the context of meaningful mitigation actions and transparency of implementation” (FCC/CP/2017/L.5, (ENB 2017)). Financial interventions that merely serve to prop up existing greenhouse gas-intensive systems of production and consumption would not create “meaningful mitigation”; and top-down finance schemes, designed without the equitable input of the communities they target, would not be truly “transparent.”


Agroecology as a holistic framework for social, economic, and production decisions in the global food system provides great promise for operationalizing equity for marginalized smallholder farmers. Through addressing the social and economic determinants of vulnerability, as well as the biophysical ones, ecological finance informed by agroecology would provide place-based, individually-tailored resilience-building interventions. Building on a base a social capital provided by joint-liability microfinance and farmer-to-farmer knowledge sharing networks, ecological finance could transform local and regional economic systems, leading to the transformation of our global systems of production and consumption that is necessary to address and mitigate the true causes of climate change.





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