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 IFC and Welcome Financial Group (WFG), the new facility—to be managed by Welcome Debt Trading Company Limited (WDT), a WFG subsidiary and a distressed asset investor and servicer in Viet Nam, 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, the residual effects of the COVID-19 pandemic, 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 Korea, WFG was the first Korean company to enter the Vietnamese NPL market three years ago. Through its Viet Nam-registered subsidiary WDT, it has acquired more than VND2 trillion ($80 million equivalent) of NPLs from three local financial institutions.
"Over the past two years, we have helped more than 16,000 customers in Viet Nam 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 IFC's global management capabilities to our group's know-how," said Son Jongjoo, the Chairman of the Welcome Financial Group.
IFC's investment is part of its broader effort, delivered in partnership with the Swiss State Secretariat for Economic Affairs (SECO), to support the development of a strong and professional NPL market in Viet Nam 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 IFC and Welcome Financial Group will bring in much-needed liquidity to the NPL market in Viet Nam. 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 Viet Nam, Cambodia, and Lao PDR.
This new facility is part of IFC's Distressed Asset Recovery Program (DARP), which focuses on the acquisition and resolution of distressed assets across emerging markets. As of March 2024, $9.1 billion was committed or mobilized through DARP—$3.2 billion from IFC's own account and $5.9 billion from third-party investors.
| About IFC IFC—a member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2023, IFC committed a record $43.7 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. |
