The joint loan arrears rate at regional-level NongHyup (mutual finance) is approaching 20%. The amount in arrears has also increased by about 1.28 trillion won so far this year. The financial sector warns that the insolvency of joint loans could lead to losses for members of local NongHyup cooperatives.
According to data received from the National Agricultural Cooperative Federation by People Power Party lawmaker Kim Sun-kyo, a member of the Agriculture. Food. Rural Affairs. Oceans. and Fisheries Committee, on the 30th, the total outstanding balance of joint loans at local NongHyup branches at the end of 4th was 23.2384 trillion won, with an arrears rate of 19.12%. The amount in arrears was 4.4427 trillion won, up 1.2783 trillion won from the end of last year. Over the same period, the arrears rate also rose by 5.5 percentage points.
A joint loan is a method in which multiple cooperatives extend a large loan together. While regional agricultural and livestock cooperatives cannot provide real estate project financing (PF) loans, loans for land purchase, such as bridge loans, are handled as joint loans by two or more cooperatives. Most joint loans by local NongHyup branches are such bridge loans.
The joint loan arrears rate at local NongHyup branches stayed low at 1.25% in 2021 and 1.88% in 2022, then jumped to 7.41% in 2023. It then surged to 13.62% at the end of last year and 19.12% at the end of Aug. this year. Over the same period, the amount in arrears increased 25-fold.
By region, Daegu and North Gyeongsang posted the highest arrears rates. The joint loan arrears rate for NongHyup in Daegu was 34.75%, with 203.9 billion won in arrears. North Gyeongsang followed with an arrears rate of 25.42% (645.9 billion won in arrears). They were followed by North Chungcheong at 22.33%, Gyeonggi at 21.58%, Gangwon at 20.21%, and South Gyeongsang at 19.66%.
The surge in joint loan arrears amounts and rates at local NongHyup branches is seen as mainly due to the slump in the real estate market. Indicators are deteriorating, centered on regions with many unsold homes, such as Daegu and North Gyeongsang. According to the Ministry of Land, Infrastructure and Transport's housing statistics for Jul., Daegu had 3,707 "high-risk" unsold homes (unsold after completion), the most in the country. North Gyeongsang also had as many as 3,235 unsold homes.
While financial institutions such as credit unions and savings banks have moved aggressively this year to clean up PF insolvencies, the cleanup of bad loans at local NongHyup branches has been sluggish. If they do not actively resolve bad loans and pursue restructuring, cooperative members could suffer losses.
Kim Sun-kyo said, "It is regrettable that NongHyup's arrears problem repeats every year without improvement," and added, "Because arrears threaten asset soundness, every effort must be made to resolve the arrears issue."