The Financial Services Commission will double the supply of Smile Finance within three years for young adults and vulnerable groups who have difficulty accessing formal finance, and for small business owners in nonmetropolitan areas. In particular, it decided to allocate half of the total funds to young adults to support those with limited credit histories taking their first steps in society.
On the 23rd, according to the Financial Services Commission, Chairperson Lee Eog-weon held the third "inclusive finance grand transition" meeting at the Nowon Integrated Support Center for Inclusive Finance in Seoul and finalized the plan. Lee said, "So far, policy-based inclusive finance has focused on quantitative screening and failed to fully reflect the realities facing young people, and support for nonmetropolitan areas has been insufficient due to a concentration in the capital region," adding, "We need on-site, tailored support that takes into account people's circumstances and local realities."
The Financial Services Commission will increase the annual supply of Smile Finance from the current 300 billion won to 600 billion won, and raise the share of loans to those age 34 and under from 10% to 50%, supplying 300 billion won a year. To that end, it will regularly disclose each foundation's target-attainment rate and provide incentives to high-performing institutions to encourage voluntary participation.
A "four-loan set" to help young adults and vulnerable groups become self-reliant will also launch. The "Youth Future Link Loan," to be unveiled on the 31st, will provide up to 5 million won at an annual interest rate of 4.5% to unemployed young adults with credit scores in the bottom 20% or lower. A grace period of up to six years will be offered to minimize repayment burdens.
The loan limit for operating funds for young self-employed people will be raised from 20 million won to 30 million won, and the grace period will be extended to two years. In particular, for young self-employed people living in nonmetropolitan areas with poor business conditions, in addition to local government interest support, the Korea INclusive Finance Agency (KINFA) will shave an additional 1.0 percentage point off the interest. A new livelihood loan at an annual interest rate of 4.5% will also be introduced for vulnerable borrowers who have faithfully repaid policy finance.
Woori Financial Group in the private financial sector also joined the effort. Woori Financial will expand its supply of inclusive finance this year to 7.2 trillion won, up 700 billion won from its original plan, and will provide an additional 100 billion won in grants to the Woori Smile Finance Foundation. It also plans to strengthen social contribution programs, including establishing new foundation branches centered in nonmetropolitan areas and the "New Hope Store" project that helps small business owners with utility bills.
Experts who attended the meeting positively assessed the focus of the measures on young adults and nonmetropolitan areas, which had been a "blind spot" in funding. Lee Gyu-bok, a researcher at the Korea Institute of Finance, said, "To ensure that on-site, close-to-the-ground support leads to real self-reliance, we need to strengthen counseling and post-management capabilities together." Lee said, "Policy-based inclusive finance is not simply about lending money; it is a social solidarity mechanism that sustains lives," adding, "We hope the spirit of inclusion spreads across the entire financial sector."