IBK, SME Loan Interest Rates Higher Than Commercial Banks (Comprehensive)

IBK Guarantee-Backed Loan Interest Rate Average 2.89%
Higher Than Commercial Banks
Credit Loan Interest Rate Also Average 4.79%
Higher Than Four Major Banks at 3.36~4.37% Level

[Asia Economy Reporter Park Sun-mi] It has been revealed that the loan interest rates for small and medium-sized enterprises (SMEs) at IBK Industrial Bank of Korea (IBK), whose establishment purpose is to support SMEs, are still higher than those of commercial banks.

According to the SME loan interest rate disclosure by the Korea Federation of Banks on the 25th, in the case of guarantee-backed loans secured by guarantee certificates from guarantee institutions such as the Korea Credit Guarantee Fund, IBK's average loan interest rate is 2.89%, which is higher than the rates of three commercial banks: Shinhan (2.56%), Hana (2.30%), and Woori (2.62%).

In particular, even when the guarantee ratio is 100%, meaning the bank has no collateral management burden, IBK's interest rate is 2.38%, exceeding the levels of the four major banks: Kookmin (2.29%), Shinhan (1.62%), Hana (1.52%), and Woori (1.88%). For loans with a guarantee ratio below 80%, only IBK forms interest rates in the 4% range, which is higher than the 3.18?3.59% range of the four major banks.

The situation is similar for unsecured loans targeting SMEs. IBK's average unsecured loan interest rate is 4.79%, higher than the 3.36?4.37% range of the four major banks. In all credit rating brackets?grades 1 to 3 (2.96%), grade 4 (3.83%), and grade 5 (5.46%)?IBK's loan interest rates exceed those of the four major banks. Even for the lowest credit ratings, grades 7 to 10, IBK's rate (6.72%) is higher than Kookmin Bank's (6.21%).

However, only for secured loans backed by real estate or other physical collateral does IBK (average 2.59%) offer lower interest rates than the four major commercial banks (2.72?2.95%).

The Role of SMEs Criticized at Every National Audit

The fact that IBK's SME loan interest rates are higher than those of commercial banks has been pointed out repeatedly during national audits.

In October last year, Assemblyman Bae Jin-kyo of the Justice Party pointed out that it is problematic for IBK, which has a high proportion of loans to SMEs and self-employed individuals amid the difficult economic situation caused by COVID-19, to have higher loan interest rates than commercial banks. He urged the expansion of low-interest loans to ensure smooth funding support for SMEs and the self-employed.

High loan interest rates inevitably become a burden for small SMEs that rely on financial sector loans as their funding channel. This is why there are calls for IBK, which maintains a leading position in the SME loan sector, to proactively lower its interest rates. Due to the worsening business environment for SMEs caused by the spread of COVID-19 last year, IBK's SME loan balance increased by 14.8% compared to 2019, reaching 186.8 trillion won, and its market share jumped to an all-time high of 23.1%.

An IBK official explained, "Even within the same credit rating bracket, IBK often lends to SMEs with lower creditworthiness than commercial banks, which may cause the average interest rate to appear somewhat higher. Also, for customers with the lowest credit ratings, IBK limits the loan interest rate to a maximum of the 9% range, whereas general commercial banks do not impose restrictions beyond 10%, so it should be considered that IBK is putting more effort into supporting vulnerable groups."

Some speculate that since President Yoon Jong-won stated, "We will expand the proportion of SME loan supply in the first half of this year to support companies facing temporary liquidity difficulties," an adjustment to lower interest rates than commercial banks will be inevitable. Last year, IBK newly supplied about 25 trillion won in funds to SMEs and small business owners and simultaneously supported easing repayment burdens through interest deferrals and maturity extensions.

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