ELECTRONIC transaction platforms can help reduce non-performing loans and prevent them from undermining bank lending and the recovery in developing countries, according to experts from the Asian Development Bank .
“To avoid rising non performing loan ratios, diminishing bank lending capacity and worsening economic performance, it is important to strengthen the way nonperforming loans are repaid or resolved,” the authors said. Park and Rosenkranz said e-transaction platforms can reduce impediments when resolving or repaying NPLs. Some of the known impediments include a limited number of active investors and scarce information around market prices and volumes.
“E-transaction platforms for nonperforming loans can address some of these market impediments more efficiently. Such platforms would create an online marketplace, bringing together buyers and sellers in the digital space, and help information flows,” Park and Rosenkranz said. Park and Rosenkranz also said e-transaction platforms can also make resolving NPLs more efficient and less costly. They said anecdotal evidence estimates that e-platform operators could offer a 55 percent to 90 percent reduction in processing time.
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