Preferential loan - a loan with an interest rate below market. This is also known as concessional financing. Sometimes concessional loans offer other benefits to borrowers, such as long periods of repayment or interest leave. Preferential loans are usually provided by governments for projects that they believe are necessary. The World Bank and other development agencies provide concessional loans to developing countries.
This contrasts with the hard credit that must be repaid in a consistent hard currency, usually a country with a stable economy. [one]
An example of a soft loan is the Export-Import Bank of China, which in October 2004 granted Angola a soft loan of $ 2 billion. US to help build infrastructure. In turn, the Angolan government gave China a share in the search for oil off the coast. Another example is the free interest-free loan Rs. The $ 20 billion provided by the Asian Development Bank (ADB) to the government of West Bengal (India), provided it is used for health, education and infrastructure development and that the government will implement 16 economic reforms. [2]
The Natural Finance area uses the term “soft loan” as a compulsory loan based on opportunities, where preferential treatment is not based on market interest, but on terms that do not include fixed maturity dates but repay a mandate when the borrower has such an option. [ source? ]
References
- ↑ Definition of hard loan . Investopedia. The appeal date is October 29, 2013.
- ↑ Mitra, Amit . Bengal gets a 2,000-cr soft loan from Asian Development Bank , Times of India (16 March 2013). The appeal date is October 29, 2013.