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SPIS Toolbox - Loan assessment: Adjust Repayment Plan to Cash Flow

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7. Loan assessment: Adjust Repayment Plan to Cash Flow

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)

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).


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