Lending against intellectual property collateral- chance and challenge to Vietnam commercial banks

Abstract

In credit operations, collateral or security is deemed as a “lifebuoy” to mitigate risks imposed on banks, ensuring the
bank is capable of recovering wholly or partially principle and interest when borrowers become insolvent. Generally,
secured loan is traditionally backed by real estate, but in the context that real estate market has shown very little
prosperity, banks could hardly recover debts. Over recent years, Intellectual Property (herein referred to as IP) has
become increasingly important. IP starts to be recognized as a market value of publicly traded companies. Gaining
access to bank credit facilities by collateralizing IP is emerging as a quite new aspect, which has been newly introduced
and lately developed in the world. IP is eyed as an effective solution for commercial banks (CBs), thereby creating a
driving force for production and business of involved enterprises. In spite being judged as a new tendency, some studies
in the world show satisfactory and positive predictions of this lending form thanks to many of its advantages, and
promisingly it would become one of the keys against the background of futuristic economy.