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:
“This, mayhap, was not logic, but it was something more potent, more real than logic—the soft insinuating voice of Sentiment.”
—Emmuska, Baroness Orczy (1865–1947)
“... the ... thing I am proudest of in my whole business life is that I do not take, that I never took in all my life, and never, never! will take, one single penny more than 6% on any loan or any contract.”
—Hetty Green (1834–1916)