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Soft Loans as an Instrument of Development Finance: A Comparative Assessment and Options for the Future

Livia Fritz / Werner Raza

Wien, September 2014

Within the framework of the Post-2015 Development Agenda, discussions on Financing for Development and the future of Official Development Assistance (ODA) have intensified. Amongst the instruments under review are soft loans. Though originally conceived as exportpromotion tools, development objectives have recently become more prominent in soft loanpolicies. Albeit regulated through the Arrangement on Officially Supported Export Credits,soft loans claim a place amongst the instruments of development policy. By means ofcomparative case study analysis, this paper examines the relevance of soft loans as aninstrument of development policy.

We discuss three characteristics of soft loan financing: (i) the institutional heterogeneity ofprogrammes between countries, (ii) the hybrid nature of the instruments between exportpromotion and development objectives, and (iii) the underlying notions of development.Upon that basis, scenarios for the future use of soft loans as an instrument of developmentfinance are presented.

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