SME Funding Conditions Worsen... Debt Increases by 7.3 Trillion Won in One Month

March SME Loan Balance 827 Trillion Won... Up 91.5 Trillion Won YoY
Individual Business Loans 396 Trillion Won... Increased 3.5 Trillion Won in One Month
Large-SME Funding Gap Remains Unchanged for Three Consecutive Months

A factory of a small and medium-sized manufacturing company located in Gimpo, Gyeonggi.
Photo by Lee Jun-hyung

[Asia Economy Reporter Lee Junhyung] It has been revealed that the outstanding loan balance of small and medium-sized enterprises (SMEs) has been steadily increasing.

According to the Small and Medium Business Institute on the 1st, the outstanding loan balance of SMEs in March was 826.9 trillion won, an increase of 7.3 trillion won compared to the previous month (819.6 trillion won). Compared to the same month last year (735.4 trillion won), it increased by 91.5 trillion won.

The outstanding loan balance of individual business owners was 396.1 trillion won, up 3.5 trillion won from the previous month (392.6 trillion won). This contrasts with the outstanding loan balance of large corporations, which decreased by 2.7 trillion won from the previous month (175.8 trillion won) to 173.1 trillion won.

Loan Balance Growth Rate Trends by Company Size. [Photo by Korea Small Business Institute]

The delinquency rate also rose. In February, the delinquency rate on SME loans was 0.44%, up 0.04 percentage points from the previous month (0.4%). Specifically, the delinquency rate for small and medium corporations was 0.59%, up 0.05 percentage points from the previous month (0.54%), and for individual business owners, it was 0.26%, up 0.02 percentage points from the previous month (0.24%).

The financial condition gap between large corporations and SMEs in the manufacturing sector remained the same for three consecutive months. The Bank of Korea's Small and Medium Manufacturing Business Financial Condition Index (BSI) was 76 for three consecutive months from January to March this year. A BSI above 100 indicates improvement, while below 100 indicates deterioration. During the same period, the BSI for large corporations was 92, maintaining a 16-point gap between large corporations and SMEs.

Corporate bankruptcies decreased while personal bankruptcies increased. In March, the number of corporate bankruptcy filings was 75, down 26 cases (25.7%) from the same month last year (101 cases). During the same period, the number of personal bankruptcy filings was 4,651, up 376 cases (8.8%) from the same month last year (4,275 cases). In the first quarter of this year, personal bankruptcy filings totaled 12,055, an increase of 813 cases (7.2%) compared to the same period last year (11,242).

Employment Trends by Company Size.
[Photo by Korea Small Business Institute]

The number of employees in SMEs showed an increasing trend. In March, the number of SME employees was 24.131 million, up 349,000 (1.3%) from the same month last year (23.997 million). The number of employees in companies with 5 to fewer than 300 workers was 14.35 million, an increase of 52,000 (0.4%) compared to the same month last year (14.298 million).

However, it was found that the increase in employment was mainly among temporary and daily workers. In March, the number of regular wage workers in SMEs was 12.138 million, up 0.3% (41,000) from the same month last year (12.097 million). Meanwhile, temporary workers (4.34 million) and daily workers (1.241 million) increased by 4.7% (195,000) and 3.3% (40,000), respectively, during the same period.

The average monthly wage in SMEs is on a decline. In January this year, the average monthly wage in SMEs was about 3.32 million won, down 5.1% (180,000 won) compared to the same month last year (about 3.5 million won). During this period, the average monthly wage in SMEs was less than half that of large corporations (6.69 million won), with a wage gap of about 3.37 million won.

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