Difference between revisions of "SPIS Toolbox - Loan Assessment: Determine Financing Volume and Profitability"
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{{SPIS Finance}}{{Back to SPIS Toolbox}} | {{SPIS Finance}}{{Back to SPIS Toolbox}} | ||
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| − | === '''<span style="color:#879637;">Outcome/Product</span>''' === | + | ==== '''<span style="color:#879637;">Outcome/Product</span>''' ==== |
*Profitability analysis of investment (and alternatives); | *Profitability analysis of investment (and alternatives); | ||
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*Financial projections on investment costs (CAPEX) (and alternatives); | *Financial projections on investment costs (CAPEX) (and alternatives); | ||
| − | === '''<span style="color:#879637;">People/Stakeholders</span>''' === | + | ==== '''<span style="color:#879637;">People/Stakeholders</span>''' ==== |
*Loan officers financing or planning to finance SPIS; | *Loan officers financing or planning to finance SPIS; | ||
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*Research and training institutes. | *Research and training institutes. | ||
| − | === '''<span style="color:#879637;">Data Requirements</span>''' === | + | ==== '''<span style="color:#879637;">Data Requirements</span>''' ==== |
'''Research, collect, analyze, cross-check''' | '''Research, collect, analyze, cross-check''' | ||
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*Payback Period (PP), Net Present Value (NPV) and Internal Rate of Return (IRR) of SPIS investment. | *Payback Period (PP), Net Present Value (NPV) and Internal Rate of Return (IRR) of SPIS investment. | ||
| − | === '''<span style="color:#879637;">Important Issues</span>''' === | + | ==== '''<span style="color:#879637;">Important Issues</span>''' ==== |
*Compare PV with alternative pumping solutions and consider varying profitability of different SPIS (crops, size). | *Compare PV with alternative pumping solutions and consider varying profitability of different SPIS (crops, size). | ||
*Work with excellent loan staff. | *Work with excellent loan staff. | ||
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Revision as of 06:48, 3 November 2017
Loan Assessment: Determine Financing Volume and Profitability
While the previous process steps focused on the policy makers, the next steps focus on the loan officers who assess single loan applications for financing SPIS.
Loan officers generally prefer to use the tools provided by their institution, but it is useful to use the tools DESIGN – Farm Analysis Tool and DESIGN – Simplified Financial Viability Tool as they are specifically designed for SPIS and can provide a first estimation of viability. In fact these tools can be provided to borrowers/loan applicants to verify their own assumptions.
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Note: Transaction costs for loan review can be high, especially if the technology has limited scope for standardization. Using specific tools, and encouraging loan applicants to use the same, can minimize unnecessary effort. |
Outcome/Product
- Profitability analysis of investment (and alternatives);
- Cash flow analysis;
- Financial projections on investment costs (CAPEX) (and alternatives);
People/Stakeholders
- Loan officers financing or planning to finance SPIS;
- Producer(s) / potential borrower(s);
- Management of financial service providers(operational level);
- Agricultural extension services and promotion agencies (e.g. for subsidies);
- Providers of service, technology and inputs;
- Research and training institutes.
Data Requirements
Research, collect, analyze, cross-check
- prices for components to be financed;
- cropping pattern and crop prices (fluctuation,trends);
- prices for O&M costs and inputs (incl. other options);
- sales revenues
- purpose and sums provided as subsidies or/ and through sponsors;
- macroeconomic variables (inflation, interest rates, etc.);
- tax policies (corporate income tax, VAT dynamics, etc.).
Compute, prepare
- water unit cost;
- annual revenue and operating expenses (OPEX) --> Annual gross margin of production (current and future);
- CAPEX (capital expenditure); i.e. total/annual sum for financing investment in SPIS (and alternative system);
- cash flow projections (current, future, alternative energy source);
- life cycle cost of SPIS investment;
- Payback Period (PP), Net Present Value (NPV) and Internal Rate of Return (IRR) of SPIS investment.
Important Issues
- Compare PV with alternative pumping solutions and consider varying profitability of different SPIS (crops, size).
- Work with excellent loan staff.
