As Sweden launches a new untied mixed credit scheme for project financing, Norway is closing down its troubled scheme. A mixed credit is a combination of an aid-funded grant and a commercial loan. It is also often referred to as a soft loan or a “development loan”.

The new Swedish scheme, worth SEK 1 billion (US$ 121 million = € 91 million) annually, will focus mainly on Sweden’s cooperation countries, like Mozambique, Tanzania, Bangladesh and Viet Nam and prioritised sectors like energy, water and the environment. The Swedish aid agency Sida expects strong demand for the new scheme as investors are pulling out of African infrastructure projects due to the global financial crisis. The grant element can cover up to 80 per cent of project credit.

The Norwegian government has now decided to close its mixed credit scheme after projects started piling up at the Norwegian aid agency, Norad. The Norwegian mixed credit system is untied, but Norway (unlike Sweden) has a tied guarantee system. This makes it difficult - if not impossible – for firms from developing countries to obtain a guarantee for contracts. This has lead to the postponement of two major Vietnamese water supply projects in Hoi An and Song Cong.

Web sites: Sida ; Norad ; IRC - Financing and Cost Recovery

Source: Development Today [subscription site] - item 1 - item 2, 03 Feb 2009

Tags: africa, east asia & pacific, financing