SME Industry "Serious Concerns Over Base Rate Hike... Request to Refrain from Excessive Loan Interest Rate Increases"

Bank of Korea Governor Lee Chang-yong is striking the gavel at the Monetary Policy Committee regular meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 12th.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] The small and medium-sized enterprise (SME) sector has expressed concerns over the Bank of Korea's decision to raise the base interest rate and urged the financial sector to refrain from excessive increases in loan interest rates.

The Korea Federation of SMEs issued a statement on the 12th, saying, "We express serious concerns over the Monetary Policy Committee's decision to raise the base interest rate by 0.5 percentage points for the second consecutive time."

According to a recent survey by the Federation, 99.6% of SMEs responded that they have either no or insufficient measures to cope with high interest rate risks. The Small and Medium Business Research Institute estimated that if the base interest rate rises to 3%, approximately 1.24 million small business owners will face the risk of bankruptcy.

The SME sector appealed, "SMEs are facing increasing difficulties due to worsening domestic and international business conditions, including the prolonged COVID-19 pandemic, soaring raw material prices, rising loan interest rates, and a global economic downturn."

They particularly pointed out the growing financial burden on SMEs. It is expected that the corporate debt balance of the five major commercial banks will exceed the household debt balance this month, and the loan interest rate for SMEs stood at 4.65% for new loans in August, surpassing the mortgage loan interest rate of 4.34%.

They urged, "The government should prepare active financial support measures, such as expanding policy fund support, to prevent SMEs temporarily facing crises from collapsing, and the financial sector should also refrain from raising loan interest rates excessively beyond the base interest rate hike."

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