Soft loan

1. A loan with a below-market rate of interest.

2. Loans made by multinational development banks and the World Bank to developing countries. Typically, soft loans have extended grace periods in which only interest or service charges are due. They also offer longer amortization schedules and lower interest rates than conventional bank loans.

Investopedia Says:
Also known as "soft financing".

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Extended term project financing made at below-market rates, especially in loans to developing countries. Soft loans are made by the special lending facility of a multinational development bank (for example, the Asian Development Fund and the African Development Fund) or the International Development Association, an affiliate of the World Bank. Typically, soft loans have extended grace periods in which only interest or service charges are due, longer (up to 50 years) amortization schedules, and lower interest rates than conventional bank loans. Access to the soft loan window is limited to developing countries with low per capita incomes, and developing countries experiencing balance of payment problems.

A soft loan ^[1] is a loan with a below-market rate of interest. This is also known as soft financing. Sometimes soft loans provide other concessions to borrowers, such as long repayment periods or interest holidays. Soft loans are usually provided by governments to projects they think are worthwhile. The World Bank and other development institutions provide soft loans to developing countries.

An example of a soft loan is China's Export-Import Bank, who gave a $2 billion soft loan to Angola in October 2004 to help build infrastructure. In return, the Angolan government gave China a stake in oil exploration off the coast.^[2]

References

1. ^ http://www.businessdictionary.com/definition/soft-loan.html
2. ^ http://www.iags.org/chinainafrica.pdf

External links

• Soft loan by India to Mongolia Dated: 15 September 2009

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