To support developing and emerging countries, the OeKB provides concessional loans, so-called soft loans, on behalf of the Federal Ministry for Finance (FMF). These loans are earmarked for sustainable projects that are implemented by Austrian companies and that benefit the general public in less developed countries. Recipient countries and domestic entrepreneurs profit equally from this special type of financing.
Better infrastructure for developing and emerging countries; opportunities for Austrian exporters
A soft loan enables governments of developing and emerging countries to finance sustainable projects by Austrian exporters under particularly favourable conditions. This provides significant support for these countries when it comes to their infrastructure, and therefore also their economic development.
Only commercially non-viable projects that improve the standard of living of the general public in developing countries are promoted. To achieve this, the focus is on infrastructure projects in important sectors such as, for example, health, water, disaster control and education. In this context, commercially non-viable means that little to no revenue is expected for the foreign operators as a result of the project. This could be, for example, a public hospital that gains no profit from its operation.
Soft loans are characterised by low interest rates, long repayment terms with grace periods, and are supported by the FMF. It is for this reason that the allocation of soft loans is strictly regulated. Aside from a project appraisal that ensures that the project contributes to sustainable development in the recipient country, the project must also be implemented by an Austrian exporter so that the Austrian economy also benefits from this. Additionally, the project must include national content of at least 50%.
Especially favourable conditions for soft loan projects
When it comes to soft loan financing, we are subject to international regulations. As stipulated in the "OECD Arrangement", as a general rule, a soft loan has to have a concessionality level of at least 35%.
For soft loan financing in the LDCs - Least Developed Countries according to the UN classification, the concessionality level has to be at least 50%.
In addition, for soft loan recipient countries that are subject to the "Sustainable Lending Initiative", the concessionality level has to meet the requirements of the International Monetary Fund (IMF).
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