Assemblyman Min Hyung-bae: "Welfare and Debt Adjustment Systems Should Be Expanded Rather Than Loans for the Underprivileged"

43% of Borrowers of 5 Major Microfinance Products Take Additional Loans from Secondary Financial Institutions

[Asia Economy Honam Reporting Headquarters Reporter Yoon Jamin] It has been revealed that 4 out of 10 borrowers of the five major low-income financial products through the Korea Inclusive Finance Agency received additional loans from high-interest financial institutions such as savings banks and loan companies. One-third of them received four or more additional loans. There are concerns that loans are not the solution for low-income people facing economic difficulties, and that welfare or debt adjustment should be expanded.

According to data on the "Status of Additional Loans of Borrowers of the Five Major Low-Income Financial Products" received on the 16th from the Korea Inclusive Finance Agency and KCB (Korea Credit Bureau) by National Assembly member Min Hyung-bae (Democratic Party of Korea, Gwangju Gwangsan-eul), out of a total of 1.85 million debtors, about 43%, or 816,869 people, received additional loans from savings banks and loan companies.

By industry, additional loans were distributed as follows: 758,527 people (40%) from credit card, insurance, and mutual finance institutions; 455,319 people (24%) from savings banks; 361,550 people (19%) from loan companies; and 283,964 people (15%) from banks.

By loan balance, credit card, insurance, and mutual finance institutions accounted for 43%, savings banks 28%, loan companies 18%, and banks 9%.

Looking at the number of additional loans, 36% of borrowers had no additional loans, 29% had four or more, 15% had one, 10% had two, and 7% had three. Approximately 64% of borrowers received at least one additional loan after taking out low-income financial products.

By loan balance, four additional loans accounted for 22%, one loan 16%, two loans 10%, and three loans 7%.

This data analyzed a total of five low-income financial products. The Korea Inclusive Finance Agency newly launched the "Haepsal Loan 17" this year, while the "Bakkwo Dream Loan" product has ended and is currently only accepting repayments.

The Bakkwo Dream Loan was a product with nearly a 30% delinquency rate and had issues with post-management. The problem is that despite the Korea Inclusive Finance Agency's declaration last year during the national audit to resolve issues faced by borrowers of low-income financial products, the proportion of debtors receiving additional loans increased this year.

Compared to last year, the proportion of loans from savings banks and loan companies increased from 36% to 43% based on the number of debtors, the proportion of those with four or more loans rose from 15% to 29%, and borrowers with at least one additional loan increased from 47% to 63%. The number of multiple debtors has increased further.

Representative Min said, "Despite the annual increase in the supply of low-income financial products, it has been revealed that the financial needs of low-income people are still not fully met due to factors such as the COVID-19 pandemic and economic recession," adding, "Special measures for debt adjustment and welfare support must be introduced to prevent low-income people from using additional high-interest loan institutions."

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