eliakeem
JF-Expert Member
- May 29, 2009
- 17,214
- 15,853
Taking the loan from China is as easy as taking a glass of water. But the challenge is paying back of those loans. These loans are associated with the stiff conditions which many borrowers fail to honor them. Failing to fulfill their obligation, lead to the Chinese to take or attach or foreclose the assets in order to realize their principal amount together with their interest.
Watch the video and see how Kenya is walking the same way that several countries passed through it and find themselves in a debt trap which makes them to be under Chinese dominance. The experts guess that, the situation will be bad in Kenyan side as projects money in most cases were overstated. This makes the project to be financially not feasible and lender it to be very difficult to fund the Chinese loans. Thing to recall is, the Chinese loans are commercial based as opposed to concessional ones. So they are really designed for projects which have +ve financial internal rate of return (FIRR). If the project economic and social economic internal rates of return (S/EIRR) surpass the FIRR, it’s advised NOT to go for Chinese loans. Chinese are in serious business. They are normally, first and foremost focus on their money invested. Experts go on saying that, through experience, very few customers of Chinese loans are doing good with their loans, but majority are in hard time. There is a need for the parties to the loans to balance their interest before getting into a financial closure. Especially the borrowers, should not be excited by Chinese loan and overlook key elements (both financial and non – financial covenants) of the loan.
Watch the video and see how Kenya is walking the same way that several countries passed through it and find themselves in a debt trap which makes them to be under Chinese dominance. The experts guess that, the situation will be bad in Kenyan side as projects money in most cases were overstated. This makes the project to be financially not feasible and lender it to be very difficult to fund the Chinese loans. Thing to recall is, the Chinese loans are commercial based as opposed to concessional ones. So they are really designed for projects which have +ve financial internal rate of return (FIRR). If the project economic and social economic internal rates of return (S/EIRR) surpass the FIRR, it’s advised NOT to go for Chinese loans. Chinese are in serious business. They are normally, first and foremost focus on their money invested. Experts go on saying that, through experience, very few customers of Chinese loans are doing good with their loans, but majority are in hard time. There is a need for the parties to the loans to balance their interest before getting into a financial closure. Especially the borrowers, should not be excited by Chinese loan and overlook key elements (both financial and non – financial covenants) of the loan.