A revision bill to raise to the legal maximum the size of the contributions that the banking sector pays to the Korea INclusive Finance Agency (KINFA) has been submitted to the Cabinet meeting. The financial authorities plan to promulgate the revision on the 14th of this month and put it into effect if it is approved at next week's Cabinet meeting. If the grant rate rises, the amount granted by the financial sector, including banks and nonbanks, is expected to increase by about 200 billion won a year.
According to the financial sector on the 3rd, the Financial Services Commission has submitted to the Cabinet meeting a partial amendment to the Enforcement Decree of the Act on Support for the Financial Life of the Underprivileged. It was confirmed that there were no changes from the revision bill preannounced at the end of last year.
The core of the revision is to raise the banking sector's KINFA grant rate from the current 0.06% to 0.1%, and the nonbank sector's grant rate—including mutual finance, savings banks, insurers, and credit card and other specialty finance companies—from 0.03% to 0.045%. The financial authorities estimated that when the revision takes effect, annual contributions will be 632.1 billion won (banking sector 381.8 billion won, nonbank sector 250.3 billion won), up 197.3 billion won (45.3%) from the current 434.8 billion won (banking sector 247.3 billion won, nonbank sector 187.5 billion won).
The banking sector's grant rate rose from 0.035% to 0.06% in Mar. last year. That is because the Act on Support for the Financial Life of the Underprivileged was revised at the same time to set the banking sector grant rate between 0.06% and 0.1%. When the revision is promulgated, it will rise to 0.1%, the legal maximum.
Contributions are calculated by multiplying a financial company's household outstanding loan balance by the grant rate. Unless there is a large change in the household outstanding loan balance, contributions increase when the grant rate rises. Contributions fund policy finance products such as KINFA's Sunshine Loan. KINFA is an institution that supports loans and guarantees for vulnerable groups who cannot use formal financial services.
The revision also includes a basis provision allowing KINFA to guarantee the credit of Credit Counseling & Recovery Service (CCRS) small-amount loan users. The credit guarantee institutions will expand from the current Seoul Guarantee Insurance Company to KINFA. The financial authorities projected that when the revision takes effect, the annual supply of CCRS small-amount loans will increase from 120 billion won to 420 billion won.