Financial and economic analysis of agroforestry: key issues

Agroforestry is seen by many as a solution to environmental problems and a sustainable enterprise especially suited to resource poor farmers. Is agroforestry amenable to economic analysis? Have we any basis for making rational decisions as to promoting agroforestry? Especially, can the perceived advantages of agroforestry - better use of resources, erosion control, multiple products - be quantified and valued? This paper addresses cost-benefit analysis as a method for systematically assessing the excess of benefits over costs of agroforestry enterprises for individuals, households and institutions and from the perspective of society as a whole. The major steps of CBA relevant to agroforestry are described and the paper reviews a number of prediction models, including erosion prediction models and the only one specifically designed for agroforestry: SCUAF (Soil Changes Under Agroforestry). Six cost-benefit studies of agroforestry are reviewed and it concludes with an identification of the key issues that will need to be addressed before further advance can be made.