소액생계비대출 대상Abolition of the limit on the number of loans once in a lifetime
Since the end of March last year, 180,000 people, 140.3 billion won in loans
43.6% of loan users are in their 20s and 30s
Mr. A, a daily construction worker, suffered from financial difficulties due to the slump in the construction industry, which made it difficult to find short-term jobs. While looking into ways to secure living expenses, he visited the ‘People’s Finance Mobile Consultation Desk’ at the Changwon Employment Welfare Plus Center after hearing that he could receive a small-sum living expenses loan. Mr. A received a small-sum living expenses loan of 500,000 won, and was able to use the National Employment Support System after receiving guidance from an employee through complex counseling. Mr. A said, “My income was cut off, and I was at a loss for living, but I was able to receive a loan right away,” and “I will definitely use the construction and carpentry skills I have accumulated so far and the National Employment Support System that guided me through it to get a job and overcome this difficult situation.” Since the government implemented the small-sum living expenses loan program in late March, 182,655 vulnerable people have received loans worth 140.3 billion won by the end of May this year.
◆Bottom 10% credit rating 92.7% = According to the Financial Services Commission on the 12th, 79.9% of users of the small-sum living expenses loan borrowed 500,000 won during the same period, and the bottom 10% credit rating accounted for 92.7%. 32.8% of users were delinquent on loans from existing financial institutions, and by age, the proportion of those in their 20s and 30s was the highest at 43.6%. This reflects the severity of youth poverty. It was found that other occupational groups (69.1%), such as day laborers, unemployed, students, and special employment workers, used the loan more than wage earners (21.8%) or business owners (9.1%). The small-sum livelihood loan is a system that provides loans of up to 1 million won to low-income and low-credit borrowers with a credit score in the bottom 20% and an annual income of 35 million won or less, even in cases where there are overdue payments or proof of income is difficult to verify. This measure was prepared by financial authorities with donations from banks to prevent vulnerable groups who are struggling to make ends meet from resorting to illegal lending and to provide breathing room for financing. Due to the nature of the system targeting vulnerable groups, the delinquency rate has risen sharply. The delinquency rate, which was 8% in September last year, reached 11.7% at the end of last year, 15.5% in March this year, and 20.8% as of the end of May. The Financial Services Commission explained, “As high prices and high interest rates persist and economic recovery is delayed, the delinquency rate is a general trend in the financial sector and other policy-based financial institutions, but the delinquency rate is higher for small-sum livelihood loans because they are targeted at borrowers with weak repayment capabilities, such as those who are delinquent on loans from financial institutions and those with low incomes and low credit.”
◆ Considering urgent fund demand, re-loans possible starting in September = Initially, small-sum livelihood loans were allowed only once in a lifetime so that more ordinary citizens and vulnerable groups could use them. However, as voices grew louder that the system should be improved so that they can be used again in situations where urgent livelihood expenses are needed, the Financial Services Commission decided to abolish the number of times and allow re-loans starting in September of this year.
However, the target was limited to cases where the principal and interest were fully repaid. When re-loaning, the basic interest rate of 15.9% is not applied, but the interest rate (minimum 9.4%) is applied if the loan is faithfully repaid for one year.
Debt adjustment support was also decided to be expanded. Currently, if conditions such as faithful interest payment are met, maturity extension is possible for up to 5 years. However, in the future, even if the maturity extension conditions are not met, if it is determined that there is a future interest repayment ability, maturity extension will be possible on the condition of partial payment of principal and interest.
In addition, for users with multiple debts, we will encourage them to use the debt adjustment system in conjunction with the Credit Rehabilitation Committee, and if it is determined during the consultation process that rehabilitation/bankruptcy procedures through the court are necessary, we will support rehabilitation/bankruptcy applications and costs, etc.
In order to increase users’ repayment ability, we will provide guidance and linkage on employment and welfare for delinquent borrowers. We will provide guidance on employment support systems such as the National Employment Support System and welfare systems through notification messages or phone consultations, and the Korea Small Business Finance Agency will establish a credit/debt consulting program for users of small-sum living expenses loans who have delinquently repaid their loans from financial institutions to support debt management. Meanwhile, on the 12th, Vice Chairman Kim So-young of the Financial Services Commission visited the ‘Central Integrated Support Center for Small Business Finance’ located in Jung-gu, Seoul, and held a meeting with loan users and center counselors to commemorate the 1st anniversary of the implementation of the small-sum living expenses loan system.
Vice Chairman Kim said, “Small business finance is an area where private financial companies have difficulty providing sufficient funds due to its nature,” and “In order to supplement this ‘market failure,’ policy small business finance such as the Small Business Finance Promotion Agency needs to provide funds to vulnerable groups such as small business owners to alleviate their difficulties.”
He emphasized, “While strengthening debt adjustment support for those who are having difficulty repaying their loans, we will also continue to make efforts to fundamentally improve users’ repayment ability through financial-employment-welfare linkage programs.”
Reporter Lee Gyeong-gi cellin@naeil.com
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