A man prepares to open his store in Myeong-dong, Seoul, in this December 2022 photo. Newsis
By Lee Yeon-woo
Loans held by the self-employed increased by over 50 percent in the four years since the beginning of the COVID-19 pandemic, data released on Sunday showed. It is interpreted that the self-employed have sustained high interest rates and weak consumer spending.
According to the data from NICE Information Service obtained by Rep. Yang Kyung-sook of the main opposition Democratic Party of Korea, the volume of loans held by 3.35 million self-employed amounted to 1,112 trillion won ($810.2 billion) as of March.
Compared to the end of 2019, right before the beginning of the COVID-19 pandemic, the number of self-employed borrowers and the total loan amount increased by 60 percent and 51 percent, respectively.
During the same period, loans delinquent for more than three months doubled from 15.6 trillion won to 31.3 trillion won. This suggests that 2.8 percent of the loans held by self-employed individuals are in danger of financial distress.
The growth rate of delinquent loans has recently quickened, with a 53.4 percent surge in just one year, compared to the figure from last March.
The situation for “multiple debtors” is far worse. The number of self-employed individuals who secured loans from more than three financial institutions is 1.72 million, account for almost half of the self-employed with loans. They hold 62 percent of the entire loan balance, or 689 trillion won, with the delinquency level reaching 24.7 trillion won.
Since the end of 2019, the number of borrowers with multiple debts and the volume of their loans have increased by 62 percent and 60 percent, respectively. The outstanding loan balance for defaulters more than doubled during the same period, rising from 12.12 trillion won to 24.75 trillion won.
Last year, the Bank of Korea warned in its Financial Stability Report that the ongoing burden of high loan interest rates may worsen the extent of non-performing loans, particularly among vulnerable borrowers, if there are delays in improvements to the income conditions for self-employed individuals.
