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SPIS Toolbox - Credit Policy: Analyze Potential
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2. 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 are 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 in case of single user; for a community based model, the payback period is reduced;
- higher credit risk.
Outcome/Product
- Study on potential of financing SPIS and recommendations for financial service provider.
Data Requirements
- Profile of end customers (cropping patterns, irrigation techniques, pumping systems, other available pumping alternatives, market);
- Current 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 and/or subsidizing SPIS initiatives;
- Donors refinancing solar-powered initiatives;
- Associations of producers / potential borrowers;
- Technology and service providers.
Important Issues
- Solar-powered irrigation technology is mature, reliable and systems costs have decreased.
- SPIS generally require higher investment than other irrigation systems, but operational costs are lower.
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