Difference between revisions of "SPIS Toolbox - Credit Policy: Select/develop Suitable Financial Instruments"
From energypedia
***** (***** | *****) m |
***** (***** | *****) m |
||
| (9 intermediate revisions by 3 users not shown) | |||
| Line 1: | Line 1: | ||
| − | {{SPIS | + | {{Spis Invest}} |
| + | {| cellpadding="1" | ||
| + | |- | ||
| + | | {{Back to SPIS Toolbox 2}} | ||
| + | | | ||
| + | | {{Back to Finance}} | ||
| + | | | ||
| + | | style="width: 150px; background-color: rgb(222, 226, 192);" | <span style="color:#000000;"><span style="font-size: 90%">'''[[SPIS_Toolbox_-_Loan_Assessment:_Determine_Financing_Volume_and_Profitability|►Go to the Next Chapter]]</span></span> | ||
| + | |} | ||
| − | === '''<span style="color: | + | === '''<span style="color: rgb(135, 150, 55);">4. Credit Policy: Select/develop Suitable Financial Instruments</span>''' === |
| − | [[File:Automated-irrigation-S.jpg|thumb|right|300px|Automated irrigation system in Morocco – largely subsidized by the state (Source: Lennart Woltering)]] | + | |
| − | When selecting or developing a loan product for SPIS it is important to ask the following questions: | + | [[File:Automated-irrigation-S.jpg|thumb|right|300px|Automated irrigation system in Morocco – largely subsidized by the state (Source: Lennart Woltering)]] When selecting or developing a loan product for SPIS it is important to ask the following questions: |
*'''Who? '''Market oriented producers, no subsistence production, producer groups possible; | *'''Who? '''Market oriented producers, no subsistence production, producer groups possible; | ||
*'''What? '''Finance for energy source and pumping system used for irrigation; energy and/or water saving technology; | *'''What? '''Finance for energy source and pumping system used for irrigation; energy and/or water saving technology; | ||
| − | *'''How much? '''Establish range of loan sum; % own-contribution of producer; % subsidy; | + | *'''How much? '''Establish range of loan sum; % own-contribution of producer; % subsidy; |
| − | *''' | + | *'''When? '''Range of loan period (years); repayment frequency (months); disbursement in tranches;<br/> |
| − | *'''Interest rate? '''From..x..% p.a. to ..x..% p.a. (range); | + | *'''Interest rate? '''From ..x..% p.a. to ..x..% p.a. (range); |
| − | *'''Collateral? '''Equipment, mortgages, additional collateral (guarantee scheme), non-traditional collateral (future harvest, warehouse), leasing scheme with equipment providers. | + | *'''Collateral? '''Equipment (Solar Pumpset), mortgages, additional collateral (guarantee scheme), non-traditional collateral (future harvest, warehouse), leasing scheme with equipment providers. |
'''Loan products for financing SPIS usually:''' | '''Loan products for financing SPIS usually:''' | ||
*have higher initial investment sums with consequently longer repayment periods and/or high installment rates; | *have higher initial investment sums with consequently longer repayment periods and/or high installment rates; | ||
| − | *need alternative guarantee schemes/ unconventional collateral; | + | *need alternative guarantee schemes / unconventional collateral; |
*have higher interest rate payments due to higher credit risk and long investment period; | *have higher interest rate payments due to higher credit risk and long investment period; | ||
| − | *focus on innovative | + | *focus on innovative and progressive borrowers, investing in high(er) value crops; |
*should be strictly oriented towards water capacity available and the farm’s specific requirements; | *should be strictly oriented towards water capacity available and the farm’s specific requirements; | ||
| − | *use no blueprint; every farm/enterprise is unique! | + | *use no blueprint; every farm / enterprise is unique! |
In order to '''prevent prohibitive loan transaction costs''', consider: | In order to '''prevent prohibitive loan transaction costs''', consider: | ||
| Line 27: | Line 35: | ||
*group financing approaches for producer groups; | *group financing approaches for producer groups; | ||
*public subsidies and sponsoring; | *public subsidies and sponsoring; | ||
| − | *favorable refinancing options for the financial | + | *favorable refinancing options for the financial institutions (e.g. subsidized interest rates offered by donors/public entities). |
In order to '''overcome the information gap '''in respect of the new technology, introduce additional activities such as: | In order to '''overcome the information gap '''in respect of the new technology, introduce additional activities such as: | ||
| − | * | + | *Encouraging (potential) clients to get informed and consult technical advice through site visits and case studies of existing installations; |
| − | * | + | *Training and sensitization of loan staff on basics about the technology; |
| − | * | + | *Monitoring loan performance closely; |
| − | * | + | *Continuous dialogue with solar pump suppliers. |
'''Note: '''SPIS clients could become future clients for other financial products (cross selling). | '''Note: '''SPIS clients could become future clients for other financial products (cross selling). | ||
| − | === '''<span style="color: | + | ===='''<span style="color: rgb(135, 150, 55);">Outcome/Product</span>''' ==== |
| − | *'''Guidelines and Procedures''' | + | *'''Guidelines and Procedures''' including assessment and decision guidelines, target key performance indicators (KPIs). |
| − | === '''<span style="color: | + | ==== '''<span style="color: rgb(135, 150, 55);">Data Requirements</span>''' ==== |
*Comparable clients liquidity pattern in current agricultural portfolio. | *Comparable clients liquidity pattern in current agricultural portfolio. | ||
| Line 53: | Line 61: | ||
*list of eligible crops; | *list of eligible crops; | ||
*list of eligible irrigation systems and average investment cost per component; | *list of eligible irrigation systems and average investment cost per component; | ||
| − | *list of eligible SPIS configurations and average investment cost per component (see '''[[ | + | *list of eligible SPIS configurations and average investment cost per component (see '''[[SPIS Design|DESIGN]]''' and '''[[SPIS - Get Informed|GET INFORMED]]''');<br/> |
*list of eligible types of collateral. | *list of eligible types of collateral. | ||
| − | === '''<span style="color: | + | ==== '''<span style="color: rgb(135, 150, 55);">People/Stakeholders</span>''' ==== |
| − | *Management | + | *Management of financial service providers; |
| − | *Experienced credit staff (senior, | + | *Experienced credit staff (senior, agri-finance); |
*Associations of producers / potential borrowers; | *Associations of producers / potential borrowers; | ||
*Agricultural extension services; | *Agricultural extension services; | ||
| − | *Research and training institutes (e.g. environmental | + | *Research and training institutes (e.g. environmental agencies); |
*Providers of service, technology and inputs. | *Providers of service, technology and inputs. | ||
| − | === '''<span style="color: | + | ===='''<span style="color: rgb(135, 150, 55);">Important Issues</span>''' ==== |
*Prevent prohibitive transaction costs for borrowers; | *Prevent prohibitive transaction costs for borrowers; | ||
| − | *Overcome information gap of financial | + | *Overcome information gap of financial operators;<br/> |
| − | *Note that standardization potential is limited | + | *Note that standardization potential is limited;<br/> |
| − | *Select | + | *Select capable loan staff for this segment with corresponding background and experience (provide training if required). |
| − | {{SPIS Reference}} | + | {| cellpadding="1" |
| + | |- | ||
| + | | {{Back to SPIS Toolbox 2}} | ||
| + | | | ||
| + | | {{Back to Finance}} | ||
| + | | | ||
| + | | style="width: 150px; background-color: rgb(222, 226, 192);" | <span style="color:#000000;"><span style="font-size: 90%">'''[[SPIS_Toolbox_-_Loan_Assessment:_Determine_Financing_Volume_and_Profitability|►Go to the Next Chapter]]</span></span> | ||
| + | |}{{SPIS Reference}} | ||
Revision as of 10:57, 30 August 2018
| ►Back to the Start Page | ►Back to the Module Page | ►Go to the Next Chapter |
4. Credit Policy: Select/develop Suitable Financial Instruments
When selecting or developing a loan product for SPIS it is important to ask the following questions:
- Who? Market oriented producers, no subsistence production, producer groups possible;
- What? Finance for energy source and pumping system used for irrigation; energy and/or water saving technology;
- How much? Establish range of loan sum; % own-contribution of producer; % subsidy;
- When? Range of loan period (years); repayment frequency (months); disbursement in tranches;
- Interest rate? From ..x..% p.a. to ..x..% p.a. (range);
- Collateral? Equipment (Solar Pumpset), mortgages, additional collateral (guarantee scheme), non-traditional collateral (future harvest, warehouse), leasing scheme with equipment providers.
Loan products for financing SPIS usually:
- have higher initial investment sums with consequently longer repayment periods and/or high installment rates;
- need alternative guarantee schemes / unconventional collateral;
- have higher interest rate payments due to higher credit risk and long investment period;
- focus on innovative and progressive borrowers, investing in high(er) value crops;
- should be strictly oriented towards water capacity available and the farm’s specific requirements;
- use no blueprint; every farm / enterprise is unique!
In order to prevent prohibitive loan transaction costs, consider:
- guarantee funds with public support or insurance;
- leasing schemes with pumping system providers and others;
- group financing approaches for producer groups;
- public subsidies and sponsoring;
- favorable refinancing options for the financial institutions (e.g. subsidized interest rates offered by donors/public entities).
In order to overcome the information gap in respect of the new technology, introduce additional activities such as:
- Encouraging (potential) clients to get informed and consult technical advice through site visits and case studies of existing installations;
- Training and sensitization of loan staff on basics about the technology;
- Monitoring loan performance closely;
- Continuous dialogue with solar pump suppliers.
Note: SPIS clients could become future clients for other financial products (cross selling).
Outcome/Product
- Guidelines and Procedures including assessment and decision guidelines, target key performance indicators (KPIs).
Data Requirements
- Comparable clients liquidity pattern in current agricultural portfolio.
Compute, prepare
- repayment plan (with varying interest rates, repayment periods and repayment frequencies);
- profitability margins by crops and farm sizes;
- tables for evaluating types of collateral;
- list of eligible crops;
- list of eligible irrigation systems and average investment cost per component;
- list of eligible SPIS configurations and average investment cost per component (see DESIGN and GET INFORMED);
- list of eligible types of collateral.
People/Stakeholders
- Management of financial service providers;
- Experienced credit staff (senior, agri-finance);
- Associations of producers / potential borrowers;
- Agricultural extension services;
- Research and training institutes (e.g. environmental agencies);
- Providers of service, technology and inputs.
Important Issues
- Prevent prohibitive transaction costs for borrowers;
- Overcome information gap of financial operators;
- Note that standardization potential is limited;
- Select capable loan staff for this segment with corresponding background and experience (provide training if required).
| ►Back to the Start Page | ►Back to the Module Page | ►Go to the Next Chapter |
