[2021 National Audit] "Adjustment Needed for Delinquency Interest Rates on Policy Funds for Small Business Owners and Self-Employed"

Policy Loan Delinquency Interest Rate Higher Than Commercial Banks

[Asia Economy Reporter Kim Cheol-hyun] It has been pointed out that the delinquency interest rates on policy funds for small business owners, self-employed individuals, and small enterprises are set higher than those of commercial banks, indicating a need for adjustment.

On the 14th, Kim Seong-hwan, a member of the National Assembly's Industry, Trade, and Small and Medium Venture Business Committee, stated this during a national audit targeting the Small and Medium Business Corporation, the Small Enterprise and Market Service, and the Korea Credit Guarantee Fund. Lawmaker Kim said, "Due to the pandemic caused by COVID-19 lasting nearly two years, business loans have increased significantly. Naturally, the demand for policy funds from the Small Enterprise and Market Service (hereafter SEMS), the Small and Medium Business Corporation (hereafter SMBC), and the Korea Credit Guarantee Fund (hereafter KCGF) has also increased, but the delinquency interest rates of these institutions are higher than those of commercial banks," he criticized.

According to data submitted by each institution, the delinquent policy fund amounts this year are 235.4 billion KRW for SEMS, 265.9 billion KRW for SMBC, and 276.3 billion KRW for KCGF. Lawmaker Kim stated, "Each institution imposes late payment penalties on these delinquent amounts, but the delinquency interest rates are higher than the limits on delinquency interest rates set for commercial banks."

According to Lawmaker Kim, with the passage of the Financial Services Commission's amendment to the Enforcement Decree of the Act on Registration of Credit Business and Protection of Financial Consumers in 2019, commercial banks are limited to delinquency interest rates within 'base interest rate + 3 percentage points.' However, SEMS and SMBC, which are not subject to this decree, calculate delinquency interest rates at 6%, and KCGF at 7%.

As the delinquent amounts of policy funds for small business owners, self-employed individuals, and small enterprises increase, the late payment penalties imposed are also becoming a burden for the self-employed. Lawmaker Kim said, "According to data submitted by each institution, the total late payment penalties incurred from policy fund delinquencies at SEMS, SMBC, and KCGF over the past three years since 2019 amount to a substantial 116.1 billion KRW. If the interest rate limits applied to commercial banks were enforced, this would be reduced to 58 billion KRW, about half the current amount."

Lawmaker Kim added, "SEMS, SMBC, and KCGF are not profit-driven institutions but organizations for small business owners, self-employed individuals, and small enterprise operators. Given that the COVID-19 pandemic has lasted nearly two years, consideration should be given to lowering the delinquency interest rates on policy funds to the level of commercial banks or even lower."

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