IFC ties up with Welcome Financial Group in non-performing loans

While supporting financial institutions to resolve their non-performing loans (NPLs) and free up capital for new lending, a $60 million platform will allow defaulted borrowers to rebuild their creditworthiness for future access to finance.

Co-funded by the IFC and Welcome Financial Group (WFG), the new facility – to be managed by a subsidiary – will focus on acquiring and resolving NPLs held by local financial institutions.

A high level of NPLs continues to constrain the Vietnamese banking sector amid multiple global crises and an underdeveloped distressed asset market. The facility is expected to help offload up to $1.2 billion of NPLs, allowing access to formal credit for up to 400,000 defaulted debtors.

With nearly 20 years of experience in the NPL business in South Korea, WFG was the first Korean company to enter the Vietnamese NPL market three years ago. Through its Vietnam-registered subsidiary WDT, it has acquired more than VND2 trillion ($80 million) of NPLs from three local financial institutions.

"Over the past two years, we have helped more than 16,000 customers in Vietnam find a way out of the credit crisis and return to a normal financial life. Through this co-investment, we will be able to provide better services to more customers by adding the IFC's global management capabilities to our group's know-how," said Son Jongjoo, chairman of WFG.

The IFC's investment is part of its broader effort, delivered in partnership with the Swiss State Secretariat for Economic Affairs, to support the development of a strong and professional NPL market in Vietnam by improving an enabling legal framework for NPL resolution and debt trading operations, adopting best industry practices, and bolstering capacity for market players.

Addressing the issue of NPLs will contribute to the development of a more resilient banking and financial sector, fostering a conducive environment for investment and economic growth in the country.

"Access to finance and credit is key to economies in emerging markets. Unresolved NPLs stall the flow of credit as well as growth. We are optimistic the partnership between the IFC and WFG will bring in much-needed liquidity to the NPL market in Vietnam. This will help financial institutions resume lending while restoring the creditworthiness of individuals and small businesses, contributing to financial stability and job creation," said Thomas Jacobs, IFC country manager for Vietnam, Cambodia, and Laos.

This new facility is part of IFC's Distressed Asset Recovery Programme, which focuses on the acquisition and resolution of distressed assets across emerging markets. As of March 2024, $9.1 billion was committed or mobilised through the initiative – $3.2 billion from IFC's own account and $5.9 billion from third-party investors.

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