IFC’s Distressed Asset Recovery Program (DARP) focuses on the acquisition and resolution of distressed assets, the refinancing and roll-over risk of viable entities, and the restructuring of small- and medium-sized enterprises (SMEs).
Maintaining credit flow
DARP is a critical and effective tool for reducing the effects of poverty in emerging markets by preventing the loss of assets (mainly family homes and productive assets) and allowing access to formal credit, while helping to preserve jobs. DARP has allowed banks to offload $30 billion in non-performing loans (NPLs) and is facilitating the normalization of obligations of more than 18 million households and SMEs. At the same time, it is introducing and supporting best resolution practices.
Access to finance and credit helps drive economic growth. When banks have unresolved NPLs on their books, the flow of credit stalls, and so does growth. With the growth of credit globally, effective ways of resolving distressed assets are increasingly critical. The ability to quickly dispose of problem assets is even more necessary during times of financial crisis. As distressed assets are cleared from a financial system, economic recovery can pick up pace and lending and job creation can resume.
Creating markets for distressed assets
By 2018, $5 billion had been committed to DARP. The program has quickly scaled: As of July 2019, $7.3 billion was committed or mobilized through DARP—$2.6 billion from IFC’s own account and $4.7 billion from third-party investors.
IFC continues to help build the infrastructure needed for distressed assets globally, serving as a catalyst for the development of secondary markets for distressed assets.