SPIS Toolbox - Credit Policy: Analyze Potential

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1. Credit Policy: Analyze Potential

Today, solar-powered irrigation is a technically mature and reliable option and an alternative to conventional irrigation approaches. When analyzing options for the development of credit policies for SPIS, the following aspects should be considered:

SPIS is likely to be a feasible option in a region if:

• energy provision for farming is a constraint (availability or cost of fuel, reliability of grid connection);
• an intensification of agricultural production is envisaged;
• producers are market-oriented and not working on subsistence level;
• producers are at least medium sized or organized in small holder groups;
• subsidized refinancing options for financial operators are available;
• grant schemes or subsidies are available to borrowers (producer);
• producers aim at specialized markets using environmental friendly technology (focusing on ecological production, which could give scope for premium pricing);
• technology distributors and system integrators available in the region;
• water is available and managed adequately so as to prevent groundwater depletion in the long run.

However, compared to conventional pumping and irrigation methods, PV-based pumping solutions have:

• a comparatively high initial capital investment requirement;
• longer repayment periods or/and significantly higher repayment rates;
• higher credit risk.

Outcome/Product

• Study on potential of financing SPIS and recommendations for financial service provider.

Data Requirements

• Profile end customers (cropping patterns, irrigation techniques, pumping systems, market);
• Current offer of loan products available for potential SPIS customer;
• Water and energy provision regime in region;
• Support/advice structures and subsidy schemes (refinancing) available for the region;
• Environmental impact assessment (long term perspective).

People/Stakeholders

• Management of financial service providers;
• Market analysts/consultants;
• Research and training institutions;
• Public entities promoting or/and subsidizing SPIS initiatives;
• Donors refinancing solar-powered initiatives;
• Associations of producers / potential borrowers;
• Technology providers;
• Service providers.

Important Issues

• Solar-powered irrigation technology is mature, reliable and systems costs have decreased.
• SPIS generally require higher investment cost than other irrigation system, but operation costs are lower.