SPIS Toolbox - Loan Assessment: Determine Financing Volume and Profitability

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5. 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 INVEST – Farm Analysis Tool and INVEST – Payback 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.

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.


  • Profitability analysis of investment (and alternatives);
  • Cash flow analysis;
  • Financial projections on investment costs (CAPEX) (and alternatives);


  • 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 etc.);
  • prices for O&M costs and inputs (including other options);
  • sales revenues
  • purpose and sums provided as subsidies and/or through sponsors;
  • macro-economic variables (inflation, interest rates, etc.);
  • tax policies (corporate income tax, GST/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 with the same scenarios and consider varying profitability of different SPIS systems (crops, size).
  • Loan should be assessed by informed, trained and capable loan staff.
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