Extent to which the terms of a soft (below market rates) loan reduce a lender's returns in comparison with a loan of the same amount and duration as the soft loan advanced at full market rates.

Donor countries and international aid oraganizations allow a certain percentage of the credit as a grant to the beneficiary developing country. The following is adefination of the term and how to calculate concessionality:

Concessionality calculation

The grant element measures the concessionality of a loan. It is defined as the difference between its nominal value (face value) and the sum of the discounted future debt-service payments (net present value) to be made by the borrower, expressed as a percentage of the face value of the loan:

Whenever the interest rate charged for a loan is lower than the market-related discount rate, the resulting present value of the debt is smaller than its face value, with the difference reflecting the grant element of the loan.



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Note added at 19 hrs (2008-06-24 08:47:23 GMT)
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I think, in this context given in your note, the translation I've suggested fits nicely. It is of course up to you whethter or not to use this term.

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