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Concessional Finance – The Opposite of Investor Finance

Positive Future #523 (Feature photo Africa Map –  Creative Commons Attribution-Share Alike 3.0 Unported license – Martin23230)

Making news recently is the continuing interest by China in investing in Africa. Of the roughly $58 billion China is planning to invest over the next 3 years, roughly $18 billion falls under the umbrella of concessionary finance. Concessionary finance includes things like grants, interest-free loans and low-interest loans. In essence, China’s concessional finance of $18 billion in some ways displaces $18 billion of other investment money.

Concessional Finance also falls under the constructs of the Federal Reserve Bank called Quantitative Easing. Over the past 10 years, the Fed has facilitated over $3 trillion in concessionary finance to help the nation pull out of the Great 2008 Recession. For that concession, the Fed only had to pay ¼% to the banks that held the deposits originating from the Fed’s activities.

No-interest or low-interest finance, is an activity in which the world’s central banks can conceivably facilitate trillions of dollars of purchasing power to finance emergency measures relating to climate change. The most likely voices of objection might come from private investors who lost out on the action. While these kinds of financing advantages are not in the global debate today, let’s see what a few more years brings.

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