Grants & Concessional Finance

Grant is an important modality under South-South cooperation which, depending on the need and the context, has covered larger humanitarian assistance and in-kind contributions to support development and economic activities in partner countries. Grants under SSC have played pivotal role in ensuring convergence of modalities and has been delivered through industrial goods, equipments and other commodities including agricultural products. With rising economic heft of some of the Southern countries the quantum of monetary assistance has gone up considerably. On some occasions, LoCs have been turned into grants a debt forgiveness, a process under which minimal cost is borne by the partner country.

As an instrument for supporting partner countries, concessional finance has existed since the late 1940s and has found general acceptance in the South. Goods, services (including consultancy services), machinery and equipment are exported to partner countries under an agreement generally supported by the respective Exim banks. The value of goods and services rendered under such schemes differ from country to country. Interest rates on such advances also vary depending on the quantum, the nature of the projects concerned, and the time over which advances are approved. Concessional finance primarily falls under two categories: loans at concessional rate of interest with or without capacity building component; and loans at commercial rate of interest with different time periods.