The Korea Trade Insurance Corp. (K-sure) has recently recovered $3.7 million worth of non-performing loans from Nigeria. The recovered money is part of export bonds worth $12.8 million a Korean trade company did not receive from a Nigerian bank due to restrictions of foreign currency transactions imposed by the Nigerian government, which has struggled with an economic crisis caused by the implications of declining crude oil prices.
K-sure plans to negotiate with Nigerian financial authorities to recover the remaining overdue bonds. The Korean trade company, a trade insurance policyholder, did not suffer a setback as it handed over the non-performing bonds to K-sure in return for insurance money.
K-sure’s recovery of non-performing loans is on the rise.
Figures released by K-sure showed that K-sure recovered non-performing loans worth 267.7 billion won in 2016, a two-fold jump from 146.4 billion won in 2012. The corporation recovered non-performing loans worth 183.4 billion won in the first eight months of this year. Given the fact that the recovery rate rises near year-end, K-sure will likely see the recovered amounts of non-performing loans for the whole of the year surpass last year’s figure.
Insured trade companies are entitled to insurance payments over insolvencies stemming from wars, riots, the suspension of foreign currencies and bankruptcies of foreign buyers.
K-sure offers insurance payments to traders within two months of insolvencies and takes over non-performing bonds from them. Recoveries of non-performing bonds from insolvent foreign buyers and insurance premiums are K-sure’s major revenue sources. K-sure’s recoveries of non-performing loans stood at 267.7 billion won last year, accounting for 33 percent of insurance premiums the corporation received during the period.
In order to raise the recovery rate, K-sure officials have persuaded foreign buyers whose insolvency odds are high or words on insolvents are circulating to advance their payments.
They paid back some debts in kind. K-sure officials suspected of cheating had filed complaints for criminal punishment.
Failure to recover foreign non-performing bonds could lead to mismanagement of trade insurance fund, raising taxpayers’ burden, K-sure President Moon Jae-do said.
Lawmakers have called for the establishment of an institution charged with unifying the compensation of export companies in the case of insolvencies and recovering and managing of foreign non-performing loans. Rep.
Park Jung of the Minju Party of Korea, sitting on the National Assembly’s Trade, Industry, Energy, SMEs and Startups Committee, is seeking to submit a proposal to the establishment of an institute specializing in the managing of foreign non-performing loans. Rep. Park said he was considering asking for a study on the efficient legislation. He stressed the need for the establishment of an institute specializing in the managing of foreign non-performing loans to recover the amounts, linked to taxpayers’ burden, and the strengthening of policy means to raise the recovery rate.