North Korean Household Informal Financial Assets at $1,761... "Little Help for Production Activation"

[Asia Economy Reporter Kim Eun-byeol] Recently, unofficial finance, where 'donju'?wealthy individuals known in North Korea?provide funds to individuals and merchants, has been spreading, but its scale remains very small and it has not played a role in revitalizing production activities.

According to the Bank of Korea's 'BOK Economic Research - Survey, Analysis, and Evaluation of North Korea's Unofficial Finance' released on the 3rd, North Korean households' unofficial financial assets averaged $1,761 and financial liabilities $408 from 2012 to 2018.

This analysis was based on a survey of 212 North Korean defectors to understand the state of unofficial finance.

By type, financial assets other than cash holdings ($1,310) amounted to $451, consisting of trade credit ($389), money lending ($54), and rotating savings and credit associations (gye, $8), while financial liabilities ($408) consisted of trade credit ($321), money lending ($79), and gye ($8).

North Korean defectors have engaged in unofficial financial activities such as trade credit, money lending, and gye, but only 27.8% of households had experienced one or more of these.

Regarding the balance of unofficial consumer credit, North Korea (1.3% of GDP) was slightly higher than the early Perestroika period in the former Soviet Union (0.9% of GNP in 1986). Here, consumer credit refers to money lending and gye for household apartment deposits, among others.

Comparing the proportion of rural households holding loans, North Korea's rate was 12.6%, slightly higher than Uganda's 10.0% (1995?96), but significantly lower than Peru's 24.8% (1999?2000) and Vietnam's 23.1% (1996?97).

Lee Ju-young, a researcher at the Bank of Korea's Economic Research Institute for North Korean Economy, stated, "The purpose of unofficial financial transactions is mostly to support trade activities, and the proportion of production funds is very low, so it does not greatly help in revitalizing production activities." He added, "The main agents of financial intermediation remain at the level of loan brokers or gye, and it is judged that they have not developed into unofficial financial enterprises (unofficial savings and loan institutions)."

This content was produced with the assistance of AI translation services.