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Difference between revisions of "SPIS Toolbox - Loan assessment: Adjust Repayment Plan to Cash Flow"
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| − | {{ | + | {{Spis Invest}} |
| + | {| cellpadding="1" | ||
| + | |- | ||
| + | | {{Back to SPIS Toolbox 2}} | ||
| + | | | ||
| + | | {{Back to Finance}} | ||
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| + | | {{Next Chapter}}[[SPIS_Toolbox_-_Bank_Loan|►Go to the Next Chapter]]</span></span> | ||
| + | |} | ||
| − | === '''<span style="color:#879637;">Loan assessment: Adjust Repayment Plan to Cash Flow</span>''' === | + | === '''<span style="color:#879637;">7. Loan assessment: Adjust Repayment Plan to Cash Flow</span>''' === |
[[File:Drip-irrigation-system.jpg|thumb|right|300pxpx|0,5 ha solar powered drip irrigation system used by a woman’s group in rural Northern Benin for production of lettuce and other vegetables (Source: Lennart Woltering)]] | [[File:Drip-irrigation-system.jpg|thumb|right|300pxpx|0,5 ha solar powered drip irrigation system used by a woman’s group in rural Northern Benin for production of lettuce and other vegetables (Source: Lennart Woltering)]] | ||
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Determining specific loan features (disbursement pattern, repayment rate, collateral, repayment frequency) should be based on cash flow projections of a particular case. | Determining specific loan features (disbursement pattern, repayment rate, collateral, repayment frequency) should be based on cash flow projections of a particular case. | ||
| − | This | + | This requires: |
*in depth understanding of the farm and family economics; | *in depth understanding of the farm and family economics; | ||
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*networking with other sources of information in the sector and region; | *networking with other sources of information in the sector and region; | ||
*thorough understanding of the market and market trends; | *thorough understanding of the market and market trends; | ||
| − | * | + | *trained staff with innovative attitudes. |
| − | SPIS | + | SPIS requires '''high initial investment'''. These may result in: |
| − | *long repayment periods ( | + | *long repayment periods (5-10 years); |
*a need for high profitability of the SPIS; | *a need for high profitability of the SPIS; | ||
*a need for a grace period at the beginning of the repayment plan. | *a need for a grace period at the beginning of the repayment plan. | ||
| − | '''Note''': High installments resulting from very short loan repayment periods can create a threatening liquidity shortage – especially in the first | + | '''Note''': High installments resulting from very short loan repayment periods can create a threatening liquidity shortage – especially in the first year. |
==== '''<span style="color:#879637;">Outcome/Product</span>''' ==== | ==== '''<span style="color:#879637;">Outcome/Product</span>''' ==== | ||
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'''Collect, compute, prepare:''' | '''Collect, compute, prepare:''' | ||
| − | *total farm liquidity analysis ( | + | *total farm liquidity analysis (both current and that projected with SPIS); |
*borrower’s own capital contribution; | *borrower’s own capital contribution; | ||
*repayment potential; | *repayment potential; | ||
*repayment plan; | *repayment plan; | ||
| − | *loan details. | + | *loan details; |
| + | *subsidy/re-finance details. | ||
===='''<span style="color:#879637;">People/Stakeholders</span>''' ==== | ===='''<span style="color:#879637;">People/Stakeholders</span>''' ==== | ||
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*Producer(s) / potential borrower; | *Producer(s) / potential borrower; | ||
*Management of financial service providers (operational level); | *Management of financial service providers (operational level); | ||
| − | *Public entities promoting or | + | *Public entities promoting and/or subsidizing SPIS; |
*Sponsors. | *Sponsors. | ||
| Line 59: | Line 68: | ||
*Specific liquidity patterns need to be identified for every single case. | *Specific liquidity patterns need to be identified for every single case. | ||
*Data collection process is challenging due to intermingled family-farm economy. | *Data collection process is challenging due to intermingled family-farm economy. | ||
| − | *High initial investment | + | *High initial investment should ideally not lead to prohibitive transaction costs (consider bank loans or external subsidies); |
| − | *High initial investment | + | *High initial investment should ideally not lead to liquidity shortages of the client due to high or very early installments (be flexible when defining installment plans). |
| − | {{SPIS Reference}} | + | |
| + | |||
| + | {| cellpadding="1" | ||
| + | |- | ||
| + | | {{Back to SPIS Toolbox 2}} | ||
| + | | | ||
| + | | {{Back to Finance}} | ||
| + | | | ||
| + | | {{Next Chapter}}[[SPIS_Toolbox_-_Bank_Loan|►Go to the Next Chapter]]</span></span> | ||
| + | |}{{SPIS Reference}} | ||
Latest revision as of 19:31, 21 July 2020
| ►Back to the Start Page | ►Back to the Module Page | ►Go to the Next Chapter |
7. Loan assessment: Adjust Repayment Plan to Cash Flow
SPIS, being based on agricultural activities, follows specific liquidity patterns, such as:
- irregularity, seasonality;
- farming-household mix;
- several cash generating activities (agricultural, non-agricultural);
- external shocks (climate, weather, pest, disease, prices).
Determining specific loan features (disbursement pattern, repayment rate, collateral, repayment frequency) should be based on cash flow projections of a particular case.
This requires:
- in depth understanding of the farm and family economics;
- strong interaction with the potential borrower;
- networking with other sources of information in the sector and region;
- thorough understanding of the market and market trends;
- trained staff with innovative attitudes.
SPIS requires high initial investment. These may result in:
- long repayment periods (5-10 years);
- a need for high profitability of the SPIS;
- a need for a grace period at the beginning of the repayment plan.
Note: High installments resulting from very short loan repayment periods can create a threatening liquidity shortage – especially in the first year.
Outcome/Product
- Cash flow statement (current, projected);
- Tailor-made disbursement and repayment plan;
- Financial risk analysis/adjustment;
- Summarized risk analysis;
- Tailor-made loan details for decision.
Data Requirements
Collect, compute, prepare:
- total farm liquidity analysis (both current and that projected with SPIS);
- borrower’s own capital contribution;
- repayment potential;
- repayment plan;
- loan details;
- subsidy/re-finance details.
People/Stakeholders
- Loan officers financing or planning to finance SPIS;
- Producer(s) / potential borrower;
- Management of financial service providers (operational level);
- Public entities promoting and/or subsidizing SPIS;
- Sponsors.
Important Issues
- Specific liquidity patterns need to be identified for every single case.
- Data collection process is challenging due to intermingled family-farm economy.
- High initial investment should ideally not lead to prohibitive transaction costs (consider bank loans or external subsidies);
- High initial investment should ideally not lead to liquidity shortages of the client due to high or very early installments (be flexible when defining installment plans).
| ►Back to the Start Page | ►Back to the Module Page | ►Go to the Next Chapter |
