## What is the cost of the loan? What is the interest rate on the loan? What is the cost of a Kafalat Plus loan guarantee?

**Cost of Kafalat Plus loan guarantee:**

*Definitions: *

• Loan value: is the value of the loan granted by the bank

• *Kafalat Plus* guarantee: 85% of the loan value granted by the bank

• Kafalat commission: 2.5% of the value of the guarantee

• Interest accrued during grace period is the value of the interest charged to the

borrower during the grace period where the borrower is not making any

repayments

• Interest accrued for 3 months: the interest that is charged by the bank for the first

3 months after the grace period

*Formula:*

([Loan Value + interest accrued during grace period + interest accrued for 3 months ]* 85% * 2.5%) + ([Loan Value + interest accrued during grace period + interest accrued for 3 months ] * 0.3% fiscal stamps)

The 0.3% fiscal stamp fee is charged once.

**Interest rate charged:***Kafalat Plus* guaranteed loans can be taken in Lebanese Pounds, US$, or any other transferable currency.

• Lebanese Pounds: banks charge the borrower 40% of the interest on the

Lebanese Treasury Bills (TB’s) of 1 year. For information on current TB rates,

please check the Central Bank.

The Central Bank subsidizes a maximum 7%, or the interest charged, whatever is lower.

Example:

If the Lebanese TB (1 year) is 6.75%, the bank uses 5.7% as the interest rate on the loan. (6.75% * 40%) + 3% = 5.7%

As this rate is less that 7%, the whole interest is paid by the central bank, and the borrower pays no interest rate.

If the Lebanese TB (1 year) rises to 12%, the bank calculates an interest rate of 7.8% on the loan, and the Central bank subsidizes 7%. The interest rate paid by the borrower is in this case 0.8%.

• US$: The banks charges LIBOR (1 year) + 5.5%. (For up-to-date LIBOR rates,

please consult the British Bankers Association.

The Central Bank subsidizes a maximum 7%.

Example:

If the LIBOR (1 Year) is 2.28%, the bank uses 7.78% as the interest rate on the loan. The Central bank subsidizes 7%. The interest rate paid by the borrower is in this case 0.78%.

**Final cost of the loan:**

The final cost of the loan is made up of:

• Cost of Kafalat commission

• Interest charged to borrower

• One time file fee may be charged by bank (maximum 400.000 Lebanese Pounds)

• Some banks charge an additional bank commission of 0.2% of the outstanding

balance calculated every three months

• 0.3% fiscal stamps fee paid once

See examples.