Loans and aid

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  • Loans and Aid
    • loans and aid
      • Loans are sums of money that at some time in the future have to be paid back with interest. The aims of loans are to make a profit.
      • Aid is gifts of money, goods, food, machinery, technology and trained workers. The aims of aid are to raise standards of living.
      • Aid is not like a loan as it does not need to be repaid, however it can be tied.
    • Impacts of loans
      • A country in need of funds for development projects can borrow from other countries, world financial organisations or international banks.
      • If projects are a success, then the debt is repaid, However if it doesn't go to plan the date has to be paid back over a longer time. People in the debtor country have to work harder to produce goods and to fund the interest. Standards of living and level of development cannot increase.
    • Debt relief and abolition
      • Poorer countries can be helped by debt relief,which means reducing the interest rate or the amount of the loan
      • Sometimes debts are abolished or written off by wealthier economies like those in the G7 group for those in the poorest countries, debtor nations benefit hugely as they can begin to improve the life for their citizens.
    • Loan solutions
      • Non profit groups in the USA have been lending money to individuals in poor countries, the aim is to improve living standards. This is often very effective.
    • Conservation swaps
    • Fair trade
    • Types of aid
      • Top down aid is money given to a government to help build infrastructure, e.g.roads and bridges. The purpose of this aid is to allow the government to run more efficiently
      • Bilateral aid is aid given directly to a poor country by a rich country, this aid is often tied.
      • Voluntary aid is aid that is given by Non Government organisations NGO's to poorer LEDC's in the form of money and gifts to help support their economy.
  • As countries try to develop, they will often destroy valuable natural resources
  • Some richer countries understand the importance of preservation so conservation swaps may occur. This is when some of the country's debts are written off in exchange for conservation projects.
  • Fair trade is an international movement ensuring producers in poor countries get a fair deal. They receive a minimum guaranteed price, this provides them with a living wage, long term contracts and security allowing poor countries to develop.

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