In 2025, the market for the sale of non-performing loan (NPL) portfolios in Brazil will continue to gain momentum. Desenrola Brasil is one of the drivers. Launched in July 2023 and ending in May 2024, the programme created by the federal government has helped more than 15 million people and reduced defaults among the most vulnerable segment of the Brazilian population.
Although it encouraged financial institutions to negotiate debts with incentives covered by the Operations Guarantee Fund (FGO), Desenrola also created counterparts. In order to ensure the return of the amounts covered by the FGO, Law 14.690 (of 3 October 2023), which established Desenrola Brasil, provides for the holding of auctions of debt portfolios that are still in default.
In practice, this means that all financial institutions that have drawn on the FGO’s resources must auction off defaulted loan portfolios in order to recover these amounts. As provided for in Law 14,690, the auction follows the rules of the Ministry of Finance and is not related to the financial health of the financial institutions licensed under Desenrola Brasil.
According to a survey carried out by Recovery, a company of the Itaú Group and leader in the purchase and management of non-performing loans in Brazil, eight financial institutions participating in Desenrola have already held auctions to sell NPL portfolios. This list includes Banco do Brasil, BMG, Bradesco, Inter, Itaú, Nubank, Pan and Sicoob.
For clients who managed to negotiate a debt under Desenrola Brasil, but didn’t have enough funds to pay it, it is important to note that the debt remains in force, even if there is an auction. In this case, the change is that the debt will no longer be negotiated with the institution that carried out the transaction under Desenrola. The default will have to be negotiated with the company that won the auction, which will take over the management of the defaulted portfolio and will be responsible for helping people to settle their debts once and for all, taking advantage of the offer negotiated at Desenrola.
IFRS 9 In addition to the obligation to auction defaulted loans negotiated at Desenrola Brasil, financial institutions may have another incentive to sell overdue portfolios. In January this year, the international accounting standard IFRS 9 came into force, which changes the way in which provisions for doubtful debts, a balance sheet item known by the acronym PDD, are presented. In practice, these provisions correspond to the amounts that financial institutions must set aside to cover potential defaults on loans and financing.
The growth of the NPL market in Brazil has skyrocketed in the last five years and it is expected that the volume traded in 2025 will exceed the 2024 figure of around R$30 billion.
The expansion of the market for the sale of credit assets also acts as fuel for the engine of the economy, as it facilitates the recovery of clients’ financial health and, consequently, their appetite for more credit.
The executive also notes that in Brazil, more and more companies other than the big banks have become assignors, i.e. they participate in the market for the sale of credit assets so that they can get these amounts back into their cash flow more quickly, leaving it to credit recovery companies such as Recovery to collect the amounts from the debtors. Digital banks, co-operatives and retailers, for example, are some of those who are betting on this strategy to have liquidity,” he says.
Source: Monitor Mercantil | Author: Redação
Edition and translation: Prime Yield
Photo: Orlando Sant’Anna for Unsplashed