Concessional loans

Insofar as your funding requirements do not qualify for a grant and your own bank is unwilling to provide financing on suitable terms, your next best option may be a concessional loan, also known as “patient debt”. Concessional loans are issued by development finance institutions (DFIs) and non-governmental finance organisations. Compared to commercial banks, these organisations accept a higher risk in return for beneficial social and/or environmental impact. Relative to commercial bank financing, they provide debt financing on terms that are ‘concessional’ as one or more of the following conditions may apply:

• longer maturities (up to 10 years)
• longer grace periods (up to 3 years)
• lower collateral requirements
• subordinated debt or other forms of quasi-equity finance
• complementary technical assistance grant

The lending policies of DFIs require that their debt is priced at an interest rate which reflects genuine country and project risk. The interest rate on concessional loans, therefore, tends to be in line with market rates. Local currency loans generally come with a much higher interest rate than Euro or US dollar-denominated loans.

Examples of assignments in which we acquired concessional loans for our clients:

• Peru: Greening the desert
• Sierra Leone: Accelerating access to solar energy

For other examples of projects funded by concessional loans, please refer to our project page.