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Understanding External Funding Terms    
Understanding some external funding terms 

What is Grant ? Grant is the provision of money from one party (the donor) to another (the recipient) where the money is not required to be paid back. It is a gift to the borrower. However, in the case of grants made by a donor to fund Madhya Pradesh State related activities, in fact the grant is made to the Government of India (GOI), not to the Government of Madhya Pradesh (GoMP). While the GOI is not required to pay back the grant to the donor, but the GoMP must repay 70% of the funds received for the activities to the GOI at a centrally fixed rate of interest.

What is Loan ? Loan is the provision of money from one party (the donor) to another (the recipient) where the money must be paid back. Usually the lender of the money requires that the market interest rate is charged on the loan. However, in the case of loans made by a donor to fund a Madhya Pradesh activity, the loan is made to the GOI, not to the GoMP. While the GOI is required to pay back all of the loan, the GoMP is only required to repay 70% of the loan received to the GOI at a centrally fixed interest rate. This rate of interest is not linked to the rate of interest that the GOI must repay to the donor.

What is Soft Loan ? Soft loan is a loan where the interest charged on the loan is lower than the market interest rate. The difference between the market interest rate and the soft loan interest rate is given by the donor as a gift. However, in the case of soft loans made by a donor to fund a Madhya Pradesh activity, the soft loan is made to the GOI, not the Government of GoMP. While the GOI is required to pay back all of the soft loan, the GoMP is only required to repay 70% of the funds received to the GOI at a centrally fixed interest rate. This rate of interest is not linked to the rate of interest that the GOI must repay to the donor.

What is Technical Assistance (TA) ? Technical assistance is a vital element in development assistance. It helps developing countries in:
Identifying, formulating, and implementing projects,
Improving the institutional capabilities of governments and executing agencies
Formulating development strategies,
Promoting the transfer of technology, and
Fostering regional cooperation.
It should be noted that in special case of the Asian Development Bank, there are several technical assistance instruments:
PPTA - Project preparatory technical assistance for the preparation of feasibility studies and detailed engineering for bankable projects;
PITA - Project implementation technical assistance covering consulting services for project implementation and initial operation, including the training of project personnel;
AOTA - Advisory technical assistance supporting institutional strengthening, sector and policy studies, and non-project-related human resource development; and
RETA - Regional technical assistance addressing issues of interest to the region or a sub-region or a group of individual developing member countries.

What is Bilateral Assistance ? Bilateral means two-sided. Bilateral assistance is the provision of loans, grants or technical assistance directly to one country from another country (the "Donor Country").

What is Multilateral Assistance ? Multilateral means many-sided. Multilateral assistance is the provision of loans, grants or technical assistance to one country from a central pool organisation (the "Donor Organisation") which obtains its money from a number of different donor countries. The World Bank and the Asian Development Bank are examples of such central pool organisations.