[Bank of Korea Financial Stability Report] Self-Employed Loans 832 Trillion Won... High-Interest Loans Increase in Accommodation and Food Services

Increase in Face-to-Face Services, Low-Income, and Metropolitan Area Loans
Rising Share of High-Interest Loans, Deterioration in Loan Quality for Self-Employed

[Asia Economy Reporter Jang Sehee] The scale of loans to self-employed individuals appears to have significantly increased due to COVID-19. The quality of loans has also deteriorated as the proportion of high-interest loans has risen.

According to the "2021 First Half Financial Stability Report" released by the Bank of Korea on the 22nd, the loan amount to self-employed individuals reached 831.8 trillion won at the end of March 2021, an increase of 28.3 trillion won compared to 803.5 trillion won in the fourth quarter of last year.

The growth rate of loans to the self-employed was 18.8%, nearly double the 10% recorded in the first quarter of last year. This also exceeds the household loan growth rate of 9.5%.

By industry, loans mainly increased in face-to-face services such as wholesale and retail (24.2%), accommodation and food services (18.6%), and leisure services (31.2%). By income bracket, the increase continued among low-income groups, and regionally, the Seoul metropolitan area showed growth.

The balance of high-interest loans in the first quarter of 2021 was 43.6 trillion won, up 1.4 trillion won from 42.2 trillion won in the fourth quarter of last year. The proportion remained at about 5.2%.

Looking at the proportion of high-interest loans by industry, accommodation and food services had the highest at 7.0%, followed by wholesale and retail (6.5%), leisure (5.1%), and real estate (3.3%).

Following COVID-19 and government financial support, the delinquency rate at the end of the first quarter was 0.24%. The proportion of vulnerable borrowers also remained low. The proportion of vulnerable borrowers at the end of the first quarter was 11.0%, down 1.2 percentage points from 12.2% in the same period last year. Based on debt amount, it decreased from 9.4% to 9.2%.

The Bank of Korea evaluated, "Loans to self-employed individuals in face-to-face service industries have increased," and "the quality of loans to the self-employed has deteriorated due to the rise in the proportion of high-interest loans."

Furthermore, it emphasized, "As financial support ends and market interest rates rise, loan delinquencies may increase, so it is necessary to accumulate provisions and for policy authorities to implement tailored support measures."

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