"There are cases where a small Korean Federation of Community Credit Cooperatives (KFCC) branch in a rural area links up with a large urban branch to sell local ginseng and sweet potatoes. Because it is done in a perfunctory way, the volume is not large. But if we use Homeplus Co.'s logistics and stores, the impact would be tremendous. We are envisioning a new concept different from the existing Hanaro Mart."
On the 17th, Jang Jae-gon, chair of the board of Jongno Gwangjang KFCC, who is running in the 20th election for president of the Korean Federation of Community Credit Cooperatives (KFCC), said in an interview with ChosunBiz that he would acquire Homeplus Co. and stated accordingly. He aims to create a new revenue source by integrating finance and retail based on KFCC's local infrastructure and network.
Chairs of the 1,262 branches nationwide will gather at the MG Human Resources Development Institute in Cheonan, South Chungcheong, to directly elect the next president by vote. In addition to Chair Jang, Chair Kim In and Yu Jae-chun, chair of the Seoul Livestock KFCC, have entered the race.
Chair Jang said the Korean Federation of Community Credit Cooperatives (KFCC) should serve as a "specialized bank for small business owners and the self-employed." He pledged that, if elected, he would build a dedicated financial system for them and develop dedicated business loan products. He also said he would develop a model to support finance for return-to-farming and return-to-rural-life moves to enhance the competitiveness of rural branches, and would build a system to disclose the federation's decision-making process to secure organizational transparency. The following is a Q&A with Chair Jang.
—What prompted you to run?
"The Korean Federation of Community Credit Cooperatives (KFCC) is a financial institution that must revive local economies for low-income people, the self-employed and small business owners. But problems arose as the federation encouraged group loans and loans to corporations. The federation is an organization created with capital from the branches, yet it is not offering solutions for them. I have worked for more than 40 years, and this has never happened. I felt that if this system continues, we will perish together. I ran because I thought something had to change."
—What is the most urgent problem to solve?
"The volume of nonperforming loans is large, and it may take years to recover. We are purchasing nonperforming loans through the KFCC Asset Management Company, and if the nonperforming loans are sold after auctions and public sales in two to three years, branches will have to bear an additional 20% to 30% loss. There is no countermeasure for this, and branches must even shoulder a 0.6% fee for the sale of nonperforming loans. Where else pays a fee when buying and selling nonperforming loans within the same organization? We must abolish the nonperforming loan management fee. We plan to reduce the burden on branches by supporting the deposit insurance reserve through federation grants."
—You proposed acquiring Homeplus Co. Is it feasible?
"Based on the consulting we received, we concluded it is a groundbreaking plan. If we run it on a membership basis and collect dues, we can lower unit prices while covering operating costs. The Korean Federation of Community Credit Cooperatives (KFCC) has 20 million members. Local branches can serve as a bridge connecting urban consumers, and using Homeplus Co. as a logistics hub would be effective."
—What do you mean by serving as a specialized bank for small business owners and the self-employed?
"NongHyup operates based on 2 million farmers. By contrast, there are at least 6.5 million small business owners and self-employed people, yet there is no financial institution solely for them. If the Korean Federation of Community Credit Cooperatives (KFCC), with assets of 300 trillion won, joins hands with the government, it can become a financial institution for small businesses. This aligns with KFCC's purpose as a pillar of the people's economy. If this happens, KFCC will have no reason to look to other group loans, and so on."
—You pointed out many problems with the federation. How will you change it?
"Integrity is paramount. Internal controls implemented by a leadership lacking integrity are ineffective. As it stands, a chair can serve only three terms, but there are cases of skirting the rules to serve four or five. How is internal control possible when the federation condones such maneuvers? We will start by sharing the federation's decision-making and policy-making processes with every branch to restore trust. When everything is divided and decisions are made behind closed doors, problems arise."