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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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