Sovereign Loans Program (SLP)
Lower-income countries have the highest rate of extreme poverty. However, the majority of people living in extreme poverty- mostly women and children- live in middle-income countries. Providing low interest sovereign loans to middle-income countries improves their ability to make important investments in poverty reduction and peace and security, while recognizing their ability to pay for these investments.
In 2018, over $620 million was budgeted for the pilot Sovereign Loans Program (SLP). This investment will enable Canada to provide sovereign loans on concessional terms to eligible recipients tailored to their needs, priorities and capacity to repay. The addition of sovereign loans to Canada’s development finance toolkit enhances the variety of support Canada can deploy and aligns it with other leading donors.
We will prioritize initiatives that have the greatest potential to close gender gaps, eliminate barriers to gender equality, and help achieve the Sustainable Development Goals (SDGs).
Discover the three main objectives of the Sovereign Loans Program.
Eligibility criteria of the Sovereign Loans Program.
Parameters of and priorities for Sovereign Loans Program funding.
Contact information for the Sovereign Loans Program.
In line with the Feminist International Assistance Policy (FIAP), the SLP will deliver on three principle objectives:
- Market building for pro-poor investments
We will make investments that address persistent market failures across sectors, expanding the reach of markets to benefit the poor and most vulnerable. In some markets, this may include working with partners to provide access to improved, more affordable basic goods and services through seeding new business models, and nascent sectors.
Learning from and helping to scale pioneering initiatives, is a vital part of the program. This will help to build the evidence base around innovative financing for development. This market building approach will include, where possible, investments in Least Developed Countries (LDCs), fragile and conflict-affected states, and countries in transition from crisis.
- Gender Equality
Our feminist approach to international assistance recognizes that the promotion of gender equality and the empowerment of women and girls. This approach requires the transformation of social norms and power relations.
The SLP will choose investments that have the greatest potential to reduce gender inequalities, and promote women’s economic empowerment. Relating to matters of gender equality, this program looks beyond outcomes in order to consider how investments are conceived and designed. The SLP will apply a gender lens across all its activities to ensure gender and social analysis contribute to, and improve, investment decisions and calculations of risk.
- Mobilizing public and private finance for the poor
The program will lever additional public and private finance into initiatives that benefit the poor, and build markets in the long-term. This long-term inclusive market building approach will use its patient, flexible, and risk-tolerant catalytic capital to help mitigate both real and perceived risks for partners. The SLP will invest in innovative and scalable solutions to current market challenges, creating opportunities for both partners and the poor and most vulnerable.
Where possible, loans provided through the SLP will focus on countries and sectors where Canada has an existing relationship with the borrower. The SLP will stand to complement the department’s existing traditional international assistance activities and the IAIP. The SLP will increase the impact of our international assistance by allowing us to explore new, comprehensive, and innovative ways to engage with partners.
All initiatives must adhere to the International Financial Assistance Act and associated regulations, and terms and conditions for the International Development Assistance program.
Under the SLP, we can only enter into loan agreements if the recipient or the guarantor of the loan is the government of a country that is:
- included in the Organisation for Economic Co-operation and Development Development Assistance Committee List;
- a borrowing member of the International Bank for Reconstruction and Development of the World Bank Group; and
- Considered creditworthy, taking into consideration World Bank and International Monetary Fund debt sustainability analyses.
SLP parameters and priorities
SLP loan terms will be negotiated on a loan-by-loan basis with eligible borrowers and must fall within the following parameters:
- Maximum loan term of ten years;
- Principal and interest payments must be made on at least an annual basis, with potential for a grace period in specific circumstances;
- Fixed interest rate equal to the Government of Canada’s cost of borrowing;
- Loans made in Canadian dollars, United States dollars, Euros, British pounds, Japanese yen or another currency identified by the International Monetary Fund as an official foreign exchange reserve currency; and
- Total outstanding loans made to or guaranteed by a country under the SLP cannot exceed 20% of the loan portfolio or $120 million, whichever is greater.
We aim to generate beneficial social, economic and environmental outcomes that would not occur in the absence of SLP support. All initiatives must contribute measurably to the achievement of the SDGs and be aligned with at least 1 of the 6 action areas of Canada’s FIAP. SLP lending decisions are made with the economic development and welfare (including peace and security) of the recipient as the main condition of lending.
The SLP will program in borrowing democratic countries and place an emphasis on those that seek to improve their democratic status. The SLP is aligned with our development assistance priorities, including the SDGs and FIAP. Where possible, loans provided through the SLP will focus on countries and sectors where Canada has an existing relationship with the borrowing country. This will allow the SLP to build linkages across the department and tap into the knowledge, expertise and networks that exist within our bilateral programs and across the mission network.
The department will work to ensure that initiatives funded by the SLP are aligned with international best practices on debt transparency and are not contributing to unsustainable levels of debt in recipient countries. The SLP will work closely with Finance Canada, who leads on Canada’s international debt policy and represents Canada at the Paris Club.
For additional information, please contact IFP-PFI@international.gc.ca.
We will not provide feedback on specific concepts/proposals.
- Date Modified: