A soft loan 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.
The field of Natural Finance uses the term Soft Loan as an enforced ability-based repayment loan where the softness is not based on below market interest, but rather on terms that don't include fixed dates for repayment, but do mandate repayment when borrower is able to.
Famous quotes containing the words soft and/or loan:
“It was a soft medicine
that came from the sea into my mouth,
moist and plump.
I swallowed.”
—Anne Sexton (1928–1974)
“Slight was the thing I bought,
Small was the debt I thought,
Poor was the loan at best—
God! but the interest!”
—Paul Laurence Dunbar (1872–1906)