IFC, Korean partner pump $60 mln towards bad debt resolution in Vietnam

International Finance Corporation (IFC) and South Korea’s Welcome Financial Group (WFG) will invest $60 million in a platform to help resolve non-performing loans (NPLs) in Vietnam.

In a Thursday statement, IFC, the World Bank Group's private sector arm said the platform will allow defaulting borrowers to rebuild their creditworthiness for future access to finance. It will focus on acquiring and resolving NPLs held by local financial institutions, it added.

Welcome Debt Trading Company Limited (WDT), a WFG subsidiary and asset investor in Vietnam, will manage the platform.

WFG, the first South Korean company to enter the NPL market in Vietnam three years ago, has acquired more than $80 million of NPLs from three local financial institutions through the WDT.

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, the IFC statement said.

It said that a high level of NPLs continued to constrain the Vietnamese banking sector amid multiple global crises, the prolonged effects of the Covid-19 pandemic and an underdeveloped market of distressed assets.

This new facility is part of the 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 had been committed or mobilized through DARP, including $3.2 billion from IFC's own account and $5.9 billion from third-party investors.

"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 IFC's global management capabilities to our group's knowhow," said WFG chairman Son Jongjoo.