Module Aim and Orientation
Financing solar-powered irrigation can be an opportunity for financial institutions seeking to diversify their loan portfolio and expanding their range of financial products. The INVEST module focuses on the product features for SPIS loans, considering direct financing by financial institution to a small and medium-scale agricultural end borrower.
The module brings out the difference of financing solar powered irrigation as compared to conventional irrigation systems. It provides guidance to financial service providers who are already financing or planning to finance SPIS. It thus addresses two groups:
- Stakeholders at management level who decide upon credit policies of a financial service provider.
- Loan officers who assess single loan applications for financing SPIS.
Three steps have been elaborated in the INVEST module to support the process of defining the financial service provider’s credit policy at the management level: Firstly, the analysis of the potential of the SPIS market segment; secondly, the determination of general credit risks involved; and thirdly, the design and test of the suitable financial instruments.
For the specific individual loan assessment process on loan operations level, three main steps have been elaborated: Firstly, the determination of the financing volume and calculation of the profitability of the investment; secondly, the assessment of credit risk and collateral of the potential borrower; and finally, determination of the cash flow and the repayment plan for the single potential borrower, along with loan conditions.
1. Basic decision-making tools
2. Credit policy: Analyze potential
3. Credit policy: Risk analysis
4. Credit policy: Select/develop suitable financial instruments
5. Loan assessment: Determine financing volume and profitability
6. Loan assessment: Assess credit risk and collateral
7. Loan assessment: Adjust repayment plan to cash flow
Annex - Collection of Formulae