Some Korean Federation of Community Credit Cooperatives (KFCC) branches that are finding it difficult to pay dividends on members' investment due to worsening management are reportedly seeking to attract capital by offering gold and gift certificates. Because they provide goods instead of dividends, some are calling it "indirect dividends."
Investment is the money paid to become a KFCC member and is classified as the cooperative's capital. Unlike deposits, it cannot be canceled and withdrawn at any time, and it is usually returned only after the settlement of account for the year is completed. Instead, dividends are paid according to the cooperative's business performance.
According to the financial sector on the 21st, events offering gold, gift certificates and daily necessities to attract investment have recently been taking place, mainly at regional KFCC branches. The A KFCC branch in Jung-gu, Seoul, will give gold to customers who pay investment through June 30 this year. It offers 0.5 gram of gold for a 10 million won payment and 1 gram for payments of 20 million won or more. Based on the price of gold bars sold by Korea Gold Exchange, those are about 155,000 won and 310,000 won, respectively.
The B KFCC branch in Dong-gu, Daejeon, is also running an investment attraction event through June 30. It gives one raffle ticket per 1 million won of investment and awards, through a drawing, 3 don of pure gold to the first-place winner (1 person), 2 don to the second-place winner (1 person), and 1 don to 25 third-place winners. Based on gold bars, first place is worth about 2.89 million won, second place 1.98 million won, and third place 990,000 won. In addition, fourth to fifth places (a total of 90 people) receive 50,000 to 100,000 won in Onnuri gift certificates. The more investment, the more raffle tickets.
The problem is that some of these branches are subject to a "dividend restriction compliance order." The Ministry of the Interior and Safety earlier this year imposed dividend restrictions on KFCC branches nationwide. As a result, branches that are subject to management improvement measures based on the results of the management status evaluation, or that have carried-over deficits, are in principle prohibited from paying dividends, and even if they have not received management improvement measures, branches that posted a net loss last year face limits on dividends.
The management status evaluation assigns a composite grade based on five items: capital adequacy, asset soundness, profitability, liquidity and management control. Grade 3 triggers a management improvement recommendation, grade 4 a management improvement demand, and grade 5 a management improvement order. Branch A recorded net losses in both 2024 and 2025 and received an overall grade of 3 in last year's evaluation, while Branch B received a grade of 4 and a management improvement demand.
Industry officials say that while cutting dividends but offering other incentives to attract investment could effectively amount to indirect dividends. Although it helps secure capital, if the poor management of local branches is not resolved, the risk of losses for members could grow. Investment is not covered by deposit insurance, so if a branch becomes insolvent, there is a possibility that the principal may not be returned.
The KFCC Federation is also aware of the issue. A federation official said, "There has been a question about whether it is appropriate to provide benefits to investors when dividends are difficult. We have already issued guidance to prohibit actions that could constitute indirect dividends."