What is the cost of the loan? What is the interest rate on the loan? What is the cost of a Kafalat Innovative loan guarantee?
Cost of Kafalat Innovative loan guarantee:
Definitions:
• Loan value: is the value of the loan granted by the bank
• Kafalat Start Up guarantee: 90% 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 ]* 90% * 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 guaranteed loans can be taken in Lebanese Pounds only.
• 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%.
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.
