Foreign Loans Gaining Attention in Banking Sector: "Small Loans Increased Among 20s and 30s"

77.1% of All Foreigners' Personal Loans Are in Their 20s and 30s

[Asia Economy Reporter Park Sun-mi]#. IBK Industrial Bank recently completely revamped its foreign customer-exclusive mobile banking app, 'i-ONE Bank Global.' The app expanded the supported languages and enhanced convenience by introducing mobile certificates. Remittance and currency exchange services were also strengthened to suit the transaction characteristics of foreign customers.

As domestic banks' interest in foreign customers has increased, the number and scale of foreigners borrowing money in Korea have surged. Foreign loans are mainly collateral loans, but recently the proportion of collateral loans has decreased, and small credit loans centered on people in their 20s and 30s have increased.

According to the report 'Trends in the Domestic Foreign Resident Loan Market' by the Korea Credit Information Services, foreign credit loans have recently expanded mainly among young people in their 20s and 30s, and especially some financial companies' specialized foreigner credit loans have greatly increased. As of the end of June this year, the number of credit loan holders by age group is highest in their 30s, followed by 20s, 40s, 50s, and 60s. The number of foreign borrowers in their 20s and 30s has significantly increased, accounting for 77.1% of all credit loans.

The number of borrowers in their 20s increased from 299 at the end of 2016 to 7,741 at the end of June this year, and those in their 30s increased sixfold from 1,604 to 9,484 during the same period. Borrowers in their 20s, who had the lowest proportion at the end of 2016, now hold the second-highest proportion after those in their 30s as of the end of June this year.

As of the end of June this year, the market concentration of foreign credit loans among those in their 20s and 30s is very high, and the recent increase in foreign credit loans is attributed to the aggressive foreign customer expansion strategies of a few financial companies. At the end of June, the top three companies accounted for over 80% market share of credit loans among those in their 20s and 30s, showing a high concentration in some financial companies.

Looking at the recently increased young foreign credit loan holders by loan balance range, it can be confirmed that the proportion of small loans under 10 million KRW has increased. As of the end of June, among foreign credit loan holders in their 20s and 30s, the highest proportion holds loans under 10 million KRW. There are 6,754 borrowers in their 20s with loans under 10 million KRW (87%), and 7,263 borrowers in their 30s with loans under 10 million KRW (67%).

Most of the increased foreign credit loan holders appear to hold loans under 10 million KRW. The number of foreign credit loan holders in their 20s with loans under 10 million KRW increased from only 89 at the end of 2016 to 6,754 in June this year, and those in their 30s increased from 351 to 7,263. In contrast, the number of borrowers with loans over 10 million KRW increased less significantly, from 213 to 991 for those in their 20s, and from 1,330 to 2,285 for those in their 30s, compared to the increase in borrowers with loans under 10 million KRW.

Kim Hyun-kyung, a researcher at Korea Credit Information Services, advised, "For financial companies to continuously embrace and expand foreign customers, they must provide financial services suitable for foreign financial demand, and sound risk management through specialized credit evaluation models for foreigners with limited financial history is essential." She also added, "Efforts should be made to activate financial services for foreigners by expanding various specialized financial services for foreigners, not only simple financial services such as remittance but also loans, insurance subscriptions, and investment advisory services."

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