The supply of Haetsal Loan 15, which has recorded over 1 trillion won in guarantee supply every year, is expected to decrease significantly next year. This is due to the reduction in the additional budget discussed regarding Haetsal Loan 15, and the target guarantee supply amount has dropped from 1 trillion won to around 600 billion won due to the depletion of the Happiness Fund.
Haetsal Loan 15 is a loan support system for low-income individuals and those with the lowest credit scores, provided by the Korea Inclusive Finance Agency. Individuals with an annual income of below 35 million won or those earning less than 45 million won and falling within the bottom 20% of personal credit scores can borrow up to 14 million won at an interest rate of 15.9% from banks (this is expected to be expanded to 20 million won by the end of 2024).
According to financial authorities on the 24th, the scale of guarantee supply for Haetsal Loan 15 has consistently exceeded 1 trillion won annually, with figures of 1.0862 trillion won in 2021, 1.4305 trillion won in 2022, and 1.3086 trillion won last year. As of the end of August this year, a guarantee supply of 580.6 billion won has been recorded.
Next year, the scale of guarantee supply is expected to decrease significantly. This is because the additional budget of 55 billion won for Haetsal Loan 15, which passed through the National Assembly's plenary session on the 10th, was not included, and only the government's proposal of 90 billion won was reflected.
When the government submitted the budget proposal, the National Assembly's Budget Policy Office expressed concerns over maintaining the same scale as last year. Haetsal Loan 15 was originally handled by the Happiness Fund, but it was transferred to the Korea Inclusive Finance Agency as the fund is expected to run out by the end of 2024. This year, approximately 400 billion won of the guarantee supply was covered by the surplus funds of the Happiness Fund. The target supply of the Korea Inclusive Finance Agency for this year's estimated guarantee supply of 1.05 trillion won is about 650 billion won.
Starting next year, there will be no surplus funds from the Happiness Fund, yet the budget has been calculated based on the same guarantee supply target of 650 billion won as this year, raising concerns.
The Budget Policy Office concluded that "considering the recent trends in household debt, it is difficult for the demand for lending guarantee products like Haetsal Loan 15 to decrease in the short term." It noted that "without consideration of the scale of guarantees, the formulation of the same budget as last year poses a risk of disruption to stable guarantee supply" and emphasized the need to prepare specific measures for securing resources. However, discussions have returned to square one with the disappearance of the additional amount.
There are also concerns that the supply scale of Haetsal Loan 15 will inevitably decrease next year due to the rising proportion of subrogation repayment. The subrogation repayment rate refers to the ratio of money that policy institutions such as the Korea Inclusive Finance Agency pay to banks when borrowers fail to repay the principal. Over the past year, the subrogation repayment rate for Haetsal Bank has increased from 8.4% to 16.2%.
As a result, worries are growing that borrowing opportunities for those with low credit scores may be on the verge of collapse. If the supply scale of loans for low-income individuals like Haetsal Loan 15 decreases, the risks of falling outside the legal framework increase. The Political Affairs Committee noted in its preliminary review report that "if the supply scale decreases excessively compared to the previous year, it could serve as an incentive to turn to illegal moneylending." The Financial Supervisory Service (FSS) also recently urged those in the lending sector to make active efforts to expand credit supply, especially for vulnerable low-income groups, to prevent them from being driven to illegal moneylending.
The Financial Services Commission is also working to fundamentally expand the resource range of the Korea Inclusive Finance Agency. Recently, the Financial Services Commission announced a legislative notice for the revision of the Enforcement Decree of the Act on Supporting Financial Lives of the Public, which aims to broaden the funding scope for the agency's inclusive finance reinforcement account and self-sufficiency support account.
A representative from the Korea Inclusive Finance Agency noted, "There has been difficulty since we have to receive grants each time a product is created, and the resources are temporarily raised, but if the funding scope is expanded, the possibility of stably supplying Haetsal guarantees will increase."