Savings Banks' Saessal Loan Gradually Suspended... Funding Interest Rates Rise for 6 Consecutive Months

As Sunsal Loan Interest Rate Cap Approaches
Concerns Over 'Negative Margin' Lead to Reduced Handling
Will Last Year's Sunsal Loan Suspension Repeat?

As the procurement costs for the policy financial product, 햇살론 (Haetsal Loan), have been rising for six consecutive months, more and more savings banks are suspending its handling. There are concerns that the year-end credit crunch for low-income borrowers will intensify.

According to the savings bank industry on the 10th, some savings banks have recently stopped supplying 햇살론. Pepper Savings Bank has not sold 햇살론 since July, and DB Savings Bank has ceased sales since September. The resumption date has not yet been determined.

As of last month, out of a total of 79 savings banks, 25 are handling 햇살론, down by four from 29 a year ago. A representative from one savings bank said, "Although we are supplying 햇살론, the scale itself is not large."

햇살론 is a financial product for low-income borrowers, guaranteed by the Korea Inclusive Finance Agency, providing loans to borrowers with credit scores in the bottom 20%, earning an annual income of 45 million KRW or less, or 35 million KRW or less. Savings banks account for about 90% of the total financial sector's handling volume.

Savings banks actively supplied 햇살론 in the first half of this year. This was because the upper limit of loan interest rates was raised by 1 percentage point (from 10.5% to 11.5% annually) starting this year, and the procurement interest rate, which had soared to 5.82% annually in January, dropped to the mid-3% range. According to the Korea Federation of Savings Banks, the supply amount of 햇살론 by savings banks in the first half of this year reached a record high of 2.0029 trillion KRW on a half-year basis.

The signs of a decrease in 햇살론 supply are emerging again as procurement costs have risen in the second half of this year. Due to growing concerns about 'negative margins,' banks are reducing their handling. The procurement interest rate for savings bank 햇살론 has been rising for six consecutive months since hitting a low of 3.62% annually in May this year. It increased from 4.04% in July to 4.08% in August, 4.13% in September, 4.21% in October, and 4.27% in November. The upper limit interest rates for 햇살론, which combine procurement rates and bank-specific additional rates, are close to the ceiling this month: 11.19% annually for Worker 햇살론 and 10.21% annually for Self-employed 햇살론, near the respective caps of 11.5% and 10.5% annually.

The procurement interest rate for savings bank 햇살론 is calculated based on the weighted average interest rate of one-year fixed deposits (newly handled amount) two months prior. It was 4.27% in September, the highest since February this year. This was influenced by savings banks competing on interest rates to encourage re-deposits ahead of the maturity of high-interest deposit products sold at the end of last year.

Since the upward trend in fixed deposit interest rates has continued for some time, the scale of 햇살론 supply is expected to decrease further. A representative from a major savings bank said, "If procurement interest rates rise further from the current level, there is a high possibility that last year's 햇살론 suspension incident will recur."

Illustration by Youngwoo Lee 20wo@

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