With President Lee Jae-myung ordering measures for loans to self-employed people and small business owners whose maturities were extended and repayments deferred during COVID-19, a large-scale debt adjustment plan is expected. About 23 trillion won of COVID-19 loans to self-employed people and small business owners will mature from the second half of this year through next year.
According to the financial authorities on the 6th, loans to self-employed people and small business owners with maturity extensions or repayment deferrals due to COVID-19 totaled 36.9 trillion won as of the end of September last year. The government-level measure to extend maturities for COVID-19 loans ended in September last year, and since then financial companies have individually granted each borrower maturity extensions of six months to one year.
About 23 trillion won of these loans will start to mature from the third quarter. Maturities of 1.5 trillion won in the third quarter of this year and 350 billion won in the fourth quarter are approaching, and from next year, maturities totaling 20.9 trillion won will come due in sequence.
COVID-19 loans reached 100 trillion won in September 2022, but have since kept declining to 36.9 trillion won. Not all of the reduction was due to normal repayment. As of the end of June, applications for debt adjustment under the New Start Fund, a debt adjustment program for self-employed people and small business owners facing difficulties due to COVID-19, totaled 32.5479 trillion won, of which 12.8816 trillion won in debt adjustments are underway. The number of applicants for debt adjustment is 206,152.
The program provides measures such as unsecured loan principal reductions, interest rate cuts, or repayment period extensions for vulnerable borrowers in arrears or at risk of arrears.
At a Ministry of SMEs and Startups briefing on the 4th, the president said the COVID-19 loans for the self-employed "cannot be left solely to personal responsibility," and ordered the preparation of government support measures. He also said, "For small business owners suffering from COVID-19, the government did not provide support but extended loans, which made the debt situation worse."
Following the president's remarks, the government decided to begin preparing measures for loans to self-employed people and small business owners. In the financial sector, options being discussed include converting COVID-19 loans to long-term installment repayment and reducing principal for borrowers without repayment capacity. Extending the New Start Fund's operation period and significantly expanding eligibility for support is also expected to be discussed.