In order to enhance economic productivity that will drive the country away from mass poverty to prosperity, a lot more investments by individuals and businesses are very necessary. The government to enable this has to reorder the capital market to be able to offer very low interest loans through different agencies.
These loans will provide capital for enterprises deemed worthy by the government that might not qualify for a loan on the open market. Such Government loan programs must aim for the following long-term benefits at the social and economic levels:
· To improve the overall national economy as well as quality of life of its citizens
· To encourage innovation and entrepreneurship
· To provide protection against disaster and calamities
· To improve on the country’s human capital
· To reward veterans and their dependents for past contributions and present needs.
Individuals and small businesses with little or no seed capital or collateral find the conditions for a market rate loan unaffordable. Low cost government loans will bridge this capital gap, thus enabling long term benefits for the recipients and the nation. Such Government loans must be offered at discounted interest rates compared to those offered by commercial firms which come at higher interest mostly requiring guarantees through cosigners.
Other comparative benefits of government loans include fixed and subsidized interest rates, no credit history checks, allowing deferred payment, flexible income-based repayment plans, no pre-payment penalties, and partial loan forgiveness if the borrower chooses public service. For example, student loans in the U.S. may be forgiven after a period of years if the graduate works in the public or non-profit sector.
Because such government loans can have more attractive terms than market-rate loans, demand for them will be large, thereby enhancing domestic economic activities in all sectors of the economy. However, selection criteria must be quite exacting, although it should not be very time consuming and requiring a lot of paperwork. For a start, the loans should target following areas:
Agriculture, rural and farm service loans - Aimed at offering financial provisions to encourage farming leading to food security and rural development under the heading agriculture and farm services loans. Such capital allows purchase of livestock, feed, farm machinery, equipment and even farmland within the eligibility criteria, constructing on-farm storage, cold-storage, processing and handling facilities for selected commodities, cereals, fruits and vegetables, renewable biomass, fisheries, financing for aquaculture, marine-culture and commercial fishing industries.
Business and industrial loans - No country or community can flourish with a stagnant marketplace. Innovation, entrepreneurship, employment and healthy competitiveness are a must for overall development of the economy and the nation. Loan programs in this must aim at encouraging these aspects of development by offering easy access to required capital for deserving businesses and industries. Such capital can be used to purchase of land, facilities, equipment, machinery and repair for any business-specific needs. Other aspects include offering management assistance to qualifying small start-ups with high growth potential and for capital requirements of transportation-related contracts, among others.