[Exclusive] Lee Jae-myung's Ultra-Low Credit Loans, 29 Cities and Counties in Gyeonggi "Oppose Strengthening Linkage"

Gyeonggi Ultra-Low Credit Loan Offering 3 Million Won at 1% Interest
Lee Jae-myung Promised "Considering Business Expansion" During Presidential Campaign
Document on 'Gyeonggi Ultra-Low Credit Loan Gathering Opinions from Mayors and County Heads' Reveals
Concerns from Cities and Counties About "Difficult Post-Management and Work Overload"

On the 8th, Lee Jae-myung, then the Democratic Party presidential candidate, was giving a speech appealing for support at the Seoul-focused campaign rally titled "The People's Dream is Lee Jae-myung's Dream," held around Cheonggye Plaza in Seoul. Photo by the National Assembly Press Photographers Group

[Asia Economy Reporter Song Seung-seop] Gyeonggi Province's attempt to strengthen the linkage of the 'Ultra-Low Credit Loan' program has met opposition from its subordinate cities and counties. The Ultra-Low Credit Loan is a financial policy designed by former Gyeonggi Governor Lee Jae-myung, and its expansion was a key pledge in the recent presidential election. Critics now argue that it was a 'blank promise' that would be difficult to implement nationwide even after election.

On the 14th, Asia Economy obtained and reviewed a document titled 'Results Report on Opinions from City and County Heads on Strengthening Linkage of Gyeonggi Ultra-Low Credit Loan,' prepared by Gyeonggi Province at the end of January. It showed that 29 cities and counties within the province opposed the plan to strengthen the linkage of the Ultra-Low Credit Loan. Only Suwon City and Gwangmyeong City expressed support.

The Ultra-Low Credit Loan is a program by Gyeonggi Province that lends up to 3 million KRW at low interest rates to low-credit individuals struggling to make a living. It was first implemented in 2020 during former Governor Lee’s tenure. The beneficiaries are those who need living expenses but have low credit ratings, making it difficult to use formal financial institutions. The interest rate is about 1% per annum, and loans are given with a maximum maturity of five years.

Discussions on strengthening the linkage of the Ultra-Low Credit Loan arose during a video conference between Gyeonggi Province and the Ministry of the Interior and Safety on December 23 last year, held to establish the Gyeonggi Foundation for Financial Inclusion. The main point was to ask cities and counties within the province to cooperate in identifying eligible recipients and in post-loan management. To gather opinions from cities and counties, regional meetings were held on January 13-14, followed by a week-long opinion collection starting January 17.

"Post-management is practically difficult and concerns over workload"

Nevertheless, most cities and counties showed reluctance because managing the Ultra-Low Credit Loan is challenging. For financial products targeting low-credit individuals, improving loan recovery rates is essential but considered a difficult task even in the private sector. Gyeonggi Province also analyzed that "many cities and counties expressed concerns about case management for post-loan monitoring and improving repayment rates for all loan recipients." Even Suwon City and Gwangmyeong City, which supported the plan, opposed case management of recipients.

Some local governments worried about increased workload. Goyang City stated, "With the launch of the special city status, the number of welfare beneficiaries has increased," adding, "Due to COVID-19 dispatched personnel and others, new tasks are impossible." Hwaseong City also submitted the opinion that "annual post-loan management once or twice a year is a burden on the officers in charge at the eup, myeon, and dong levels due to the cumulative increase in loan recipients year by year."

In response, Gyeonggi Province decided to either proceed independently or request a dedicated institution to take charge. The reception for this year’s Gyeonggi Ultra-Low Credit Loan, which began on the 7th, is also being handled by the province’s Financial Welfare Support Center for low-income residents.

This has raised questions about whether former Governor Lee Jae-myung’s pledge as the Democratic Party’s presidential candidate to expand the Ultra-Low Credit Loan program was practically difficult to fulfill. Last month, when announcing his 15th 'Myeonghwakhaeng (Lee Jae-myung’s Certain Happiness)' pledge, Lee said, "We will consider ways to expand the Ultra-Low Credit Loan program that was implemented in Gyeonggi Province." Professor Kim Dae-jong of the Department of Business Administration at Sejong University pointed out, "Lending money at around 1% interest to low-credit individuals offers no guarantee of recovery through policy or product design," adding, "It seems like a policy aimed at gaining votes."

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