If cooperatives in mutual finance institutions such as NongHyup, Korean Federation of Community Credit Cooperatives (KFCC), and credit unions increase loans to regions and low-income residents, lending regulations such as the loan-to-deposit ratio (the share of loans in deposits) will be eased. For cooperatives that actively handle inclusive finance (tentatively named inclusive cooperatives), the central association will be able to support profitability and liquidity.
The Financial Services Commission said on the 30th that it held a kickoff meeting of the "mutual finance institutions system improvement task force (TF)" on the 29th and discussed measures to expand inclusive finance.
The Financial Services Commission (FSC) set the scope of inclusive finance for mutual finance institutions as the provision of funds to regions (non-capital areas), low-income residents (middle- to low-income and credit borrowers), and social solidarity economy organizations. Social solidarity economy organizations include social enterprises, cooperatives, village corporations, self-sufficiency corporations, and social ventures. The FSC decided to provide incentives such as regulatory easing to strengthen the inclusive finance role of mutual finance institutions.
For regional and low-income loans, the FSC is reviewing measures to adjust weights when calculating the share of loans to nonmembers or the loan-to-deposit ratio. To vitalize social solidarity finance, it will also push to refine laws and systems, including an amendment to the Credit Unions Act that allows credit unions to invest in other corporations.
A system will also be put in place for cooperatives and the central association to share risks arising from implementing inclusive finance. The structure allows the central association to support revenue and liquidity to prevent deterioration in the soundness of inclusive cooperatives. It will also enhance credit evaluation capabilities by upgrading its own alternative credit scoring model (CSS·Credit Scoring System).
Kim Jin-hong, director general of the financial industry bureau at the Financial Services Commission (FSC), who presided over the meeting, said, "Inclusiveness is a key pillar that drives the restoration of trust in mutual finance institutions," and added, "Unlike other financial sectors, mutual finance institutions have the advantage of personal bonds among members, so please actively participate in expanding inclusive finance by leveraging this."