최저신용자 특례보증This is because loans are made to those with the lowest credit, so profitability is not good and the delinquency rate can increase even though the loans are guaranteed by the Korea Inclusive Finance Agency. This raises concerns that the lending cliff for people with low credit may worsen.
According to the savings bank industry on the 31st, the Korea Federation of Savings Banks is conducting a demand survey on savings banks until the 4th of next month to expand the handling of special guarantee products for the lowest credit borrowers. Currently, there are only two financial companies that handle special guarantees for the lowest credit borrowers in the first-tier financial sector: Gwangju Bank and Jeonbuk Bank, and three in the second-tier financial sector: Welcome Savings Bank, DB Savings Bank, and NH Savings Bank.
The special guarantee for people with the lowest credit is a credit loan product that lends up to 10 million won to those who have difficulty using low-income finance products such as Sunshine Loan 15 among those with the lowest credit score who are in the bottom 10% of the credit score and whose annual income is less than 45 million won. The base interest rate is 15.9% per year.
This is a method of supplying special guarantees to prevent damage from illegal private financing to those with the lowest credit who are likely to be excluded from institutional finance due to rising interest rates. The guarantee provider is the Korea Inclusive Finance Agency and the loan is issued by a financial institution.
Since even microfinance products are difficult to use for those with the lowest credit ratings, there is even an open run to receive special guarantees. Currently, Gwangju and Jeonbuk Bank have a limit of 7 billion won, Welcome Savings Bank has a limit of 3 billion won, and DB Savings Bank has a limit of 500 million won. When these financial companies start accepting applications, most of the one-month limit is used up in one day. An official at Wolcom Savings Bank said, “The prepared limit will be exhausted within a short period of time on the same day,” and added, “In order to expand the special guarantee for the lowest credit borrowers, the number of suppliers must increase.”
Accordingly, even the Korea Federation of Savings Banks is looking for institutions to provide loans, but savings banks are turning a blind eye. At the time of the actual launch, savings banks affiliated with financial holding companies (Shinhan, KB, Hana, Woori Financial Savings Bank) and IBK and BNK Savings Bank were planning to launch it, but they are still delaying the launch.
An official at a savings bank said, “As savings banks provide a variety of policy financial products such as Saitdol and Sunshine Loans, financial resources for policy products are quickly exhausted.” “The probability is very high, and even if the savings bank provides coverage later, it will inevitably be burdensome for savings banks as it will eventually be held as a delinquency rate,” he explained.
If delinquency occurs under the special guarantee for those with the lowest credit, there are procedures such as the Guarantee, the Korea Inclusive Finance Agency, making subrogation payments and requesting reimbursement from the borrower. However, in the end, it is a structure that can increase the delinquency rate of the banking sector if those with the lowest credit do not repay their loans on time.
An official from a savings bank said, “Currently, we know that there is no demand other than the three savings banks that handle special guarantees for those with the lowest credit,” and “We are continuing to incur losses until the second quarter and the outlook for the second half is not good, so we need to actively provide loans for those with the lowest credit.” “It’s a difficult situation,” he said.
In fact, the performance of savings banks has continued to deteriorate this year. According to the ‘Savings Bank Operating Performance for the First Half of 2023 (Provisional)’ announced by the Financial Supervisory Service, the net loss of 79 savings banks in the first half of this year was KRW 96.2 billion. As of the first half of the year, net profit decreased by 991.8 billion won compared to the same period last year (895.6 billion won). Following the first loss in nine years with 52.8 billion won in the first quarter, the company also posted a loss of 43.4 billion won in the second quarter.
Asset quality deteriorated. Delinquency and default on existing loans have increased significantly. As of the end of the first half of this year, the total loan delinquency rate was 5.33%, up 1.92 percentage points from the end of last year. In particular, it soared nearly double compared to the same period last year (2.60%).
The savings bank industry argues that in the case of special guarantees for the lowest credit borrowers, the number of supply institutions should be increased, focusing on first-tier financial institutions. An official from a savings bank said, “The special guarantee for those with the lowest credit is not a product that only savings banks can handle,” and added, “First-tier financial institutions should step forward rather than the savings banking industry, which is already mainly handling loans for low-to-middle credit borrowers.”
Experts were concerned that such actions by savings banks could drive those with the lowest credit into illegal private loans, but agreed that the suppliers of special guarantees for the lowest credit should be expanded to first-tier financial institutions.
Seo Ji-yong, a professor of business administration at Sangmyung University, pointed out, “As the delinquency rate of savings banks is rising, even institutions that handle special guarantees for the lowest credit borrowers are trying to reduce their limits. As the lending cliff for the lowest credit borrowers deepens, the likelihood of them being pushed into illegal private lending is increasing.” He said, “Rather than savings banks, which must focus on managing delinquency rates, first-tier financial institutions such as internet-only banks should take on this role of inclusive finance.”
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