soft loan

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Soft Loan

A loan made at no interest or at a below market interest rate. Soft loans usually refer to loans made to developing countries and others in need of financing, but without the ability to borrow at the market rate. Soft loans may also have a longer grace period or a different amortization schedule that makes repayment easier. This is also called soft financing.

soft loan

a LOAN that bears an INTEREST RATE charge which is much lower than the market rate of interest for such loans. Soft loans are made available by the government to encourage investment in particular types of industrial activity or in particular regions, and by international organizations such as the INTERNATIONAL MONETARY FUND and WORLD BANK to help countries with balance-of-payments difficulties, provide economic aid and to assist industrial development. See INDUSTRIAL POLICY, REGIONAL POLICY.

soft loan

a LOAN that bears an INTEREST RATE charge substantially below that of the interest rate that is charged normally on a loan for a similar purpose and risk status.

Soft loans are often given as a form of ECONOMIC AID to DEVELOPING COUNTRIES by developed countries and international institutions (see WORLD BANK) and are used as a form of EXPORT SUBSIDY. In addition, soft loans may be used to influence industrial location under a country's REGIONAL POLICY.

References in periodicals archive ?
The National Bank for Agriculture and Rural Development (Nabard) has approved soft-loan of Rs 4,392 crore to the Orissa government under the Rural Infrastructure Development Fund (RIDF).
Manfredo Topke, president of Ancafe, the Guatemalan private growers' association, said that coffee exports would continue to drop as Government plans to bail out price-hammered farmers with a US$100 million soft-loan package failed to materialize.
ADB President Tadao Chino also said at the conclusion of the Manila-based agency's annual board of governors meeting that negotiations on replenishing the ADB's soft-loan fund would begin in Australia in October.