With the government tightening management of household loan growth and regulating real estate project financing (PF), mutual finance institutions, which have found it harder to secure investment destinations, are accelerating the expansion of non-interest businesses. They are moving to diversify their revenue structures by growing their mutual aid and card institutional sectors.
According to the financial sector on the 17th, mutual finance institutions such as credit unions, the Korean Federation of Community Credit Cooperatives (KFCC), and the National Federation of Fisheries Cooperatives have recently unveiled back-to-back strategies to expand their mutual aid businesses. Mutual aid products, sold to members and associate members, are protection-type and savings-type products and are regarded as representative non-interest businesses. The central federations design the products and local cooperatives sell them.
The Korean Federation of Community Credit Cooperatives (KFCC) is taking the lead in the mutual aid business. As of the end of last year, the KFCC's mutual aid institutional sector assets stood in the 19 trillion won range, outpacing the asset size of some mid-tier insurers at around 15 trillion won. It is expanding its customer base with products that reimburse injury expenses incurred during hobbies, and is also broadening its lineup by launching products that cover high-cost cancer treatments such as carbon ion therapy.
Credit unions are also picking up speed in expanding the mutual aid business. At a vision declaration event last month, credit unions presented a mid- to long-term goal to increase mutual aid assets from about 6.3 trillion won at the end of last year to 10 trillion won. They have since moved to diversify products by launching a single-premium savings mutual aid product guaranteeing 4% annual compound interest. The National Federation of Fisheries Cooperatives is likewise expanding its mutual aid business by launching health, surgery, hospitalization, and driver mutual aid products from the start of the year.
The card business is also emerging as a pillar of non-interest operations. After entering the card business in 2024, the Korean Federation of Community Credit Cooperatives (KFCC) has been rolling out various credit cards in collaboration with Hana Card. The "MG S+" card drew strong demand with its high picking rate (benefit-to-spending ratio), and in the second half of this year it is considering launching a new card targeting young users who frequently use over-the-top (OTT) online video services. Credit unions and the National Federation of Fisheries Cooperatives are also expanding their card businesses through partnerships with card companies.
Mutual finance institutions are seeing their revenue base shaken as loan growth has been effectively cut off by stronger household loan management. On top of that, tighter real estate PF regulations have reduced mutual finance institutions' PF loan limit to within 20% of total loans, and capped the combined limit for real estate, construction, and real estate PF loans at 50% of total loans, shrinking their capacity for alternative investments.
An official at a mutual finance institution said, "In the past, growth came from increasing loans, but now the strategy is shifting toward raising the share of non-interest businesses."