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Definition of 'Soft Loans'

Definition: A soft loan is basically a loan on comparatively lenient terms and conditions as compared to other loans available in the market. These easier conditions might be in the form of lower interest rates, prolonged repayment duration, etc.

Description: The repayment of these soft loans might also include interest holidays. This process of extending soft loans is also known as soft financing or concessional funding. As the loans extended are at much easier terms, these are generally not provided by private financial institutions. They are primarily provided by government agencies.

Example: The Chinese government had extended a soft loan to Angola in 2004 in return for which Angola gave Beijing oil exploration opportunities in the country.

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