A concessional loan is cheaper and more patient than a commercial credit of similar size. Lenders, often official agencies, accept lower returns to support development projects or budget needs in lower-income countries.

Key takeaways

  • Grant elements (how soft the terms are) can be measured against market benchmarks.
  • Soft pricing does not remove the duty to repay principal when due.
  • Conditionality may attach to reforms, procurement rules, or project milestones.
  • Mixing concessional and commercial debt changes the country’s average interest burden.