Savings banks cut loans to sole proprietors and other individual businesses by 16% in a year. They shifted their portfolios by reducing loans to corporations and increasing the share of household loans. In particular, small-amount unsecured loans, a quick-cash channel for low-income people, hit their highest level since 2008, and the interest rate is higher than card loans, which are considered high-interest. Critics say savings banks are moving in a direction different from the government's "productive finance" policy.
According to the Financial Supervisory Service on the 21st, outstanding corporate funds loans at 79 savings banks stood at 46.7340 trillion won at the end of the first half of this year, down 10.3% from the same period a year earlier (52.1303 trillion won). Loans to small and midsize companies fell 12.3% over the same period, from 49.2806 trillion won to 43.2119 trillion won. In particular, loans to individual business owners, mainly used by sole proprietors, fell 16.2% from 17.0952 trillion won to 14.3096 trillion won.
Savings banks are increasing household loans while reducing loans to small and midsize companies and sole proprietors. Outstanding household funds loans were 41.0684 trillion won in the first half of this year, up 5.5% from the same period a year earlier. In particular, small-amount unsecured loans rose 12.2% over the same period, from 1.1473 trillion won to 1.2880 trillion won. It is the first time since 2008 that small-amount unsecured loans at savings banks have exceeded 1.2 trillion won.
Small-amount unsecured loans are products that sole proprietors also use frequently. They are also used as a quick-cash channel for sole proprietors who cannot obtain individual business loans. However, according to the Bank of Korea's Economic Statistics System, the interest rate on small-amount unsecured loans of 3 million won or less at savings banks was 16.1% in Aug., higher than the average interest rate on card loans, a representative high-interest product, in Sep. (14.1%). Compared with the interest rate on small-amount loans of 5 million won or less at major banks (6.28%), it is more than double. As individual business loans are tightened, more sole proprietors are being pushed into high-interest loans.
The decline in savings banks' loans to small and midsize companies is due to bad debts in real estate project financing (PF). Savings banks had engaged aggressively in lending, with roughly half of their loans to small and midsize companies filled by real estate PF. But when large-scale delinquencies emerged, they began writing off and selling bad debts, which reduced the overall balance.
However, some note that tightening individual business loans is not directly related to the bad debts in real estate PF. Because most sole proprietors who use savings banks are mid- to low-credit borrowers, savings banks reduced higher-risk individual business loans and shifted to a more conservative approach. In contrast, outstanding individual business loans at the three internet-only banks—Kakao, Toss, and Kbank—reached 5.5 trillion won in the first half of this year, more than tripling in three years.
A savings bank official said, "We expanded individual business loans in the past, but with the business climate weak recently, we are focusing on risk management rather than aggressive lending," adding, "This is about adjusting the portfolio conservatively." The official said, "Many individual business loans are also backed by dwellings as collateral, and with the real estate market sluggish, it is not easy to increase them."