SMEs Face Increasing Difficulties in Obtaining Loans from Banks

[Asia Economy Reporter Kim Eun-byeol] Amid the ongoing impact of the novel coronavirus infection (COVID-19) spread, this year is expected to be tougher for small and medium-sized enterprises (SMEs) to obtain loans from banks.

According to the 'Financial Institution Lending Behavior Survey Results' announced by the Bank of Korea on the 13th, the comprehensive loan attitude index of domestic banks in the first quarter of this year was -8. Although this is an easing compared to the previous quarter (-19), banks are still expected to strongly manage loans. This index (ranging from 100 to -100) indicates that a positive (+) value means more institutions responded that they would ease lending, while a negative (-) value means more institutions responded that they would tighten lending.

Looking at the survey results on lending attitudes toward companies, the loan attitude for large corporations remained at -3, the same as the previous quarter, but for SMEs, it turned negative at -6 compared to 3 in the previous quarter. Until the end of last year, loans were operated more leniently due to extensions of maturity and interest payment deferrals for SMEs affected by COVID-19, but from the first quarter, it implies that banks may tighten lending.

The lending attitude toward households eased compared to the fourth quarter of last year but still remained negative. The loan attitude toward household housing was -6, up from -24 in the previous quarter but still negative, indicating that housing loans may still be stringent. The loan attitude toward general household loans was -12, significantly eased from -44 in the previous quarter but still negative.

The credit risk index by borrower increased to 25, up from 22 in the fourth quarter of last year. While the indices for large corporations (12) and SMEs (29) remained steady, the household credit risk index rose from 15 to 21.

Loan demand is expected to increase. A Bank of Korea official explained, "Corporate loan demand is expected to increase, especially among SMEs, due to expanded working capital and surplus fund needs caused by sales declines from strengthened social distancing measures."

Regarding household loan demand, the official stated, "It is expected to increase mainly in general loans due to demands for home purchases, jeonse deposits, and financial investments."

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