The financial authorities decided to exclude livelihood-stability loans from the total volume of household loans to expand lending by secondary financial institutions (financial firms that are not banks under the Banking Act) for mid- to low-credit borrowers, but industry voices say blanket easing has limits and that incentives tailored to each sector's conditions are needed.
On the 21st, the Financial Supervisory Service said it would exclude 100% of the increase in mid-rate loans for mid- to low-credit borrowers supplied by secondary financial institutions from the total volume of household loans. Previously, savings banks were excluded for 80% of the increase, while specialized credit finance companies such as card and capital firms were excluded for only 40% from the total.
Savings banks, capital firms and card companies have recently been rolling out mid-rate loan products one after another. Product interest rates are in the 7%–14% annual range, and the loan limit is mostly 10 million won. Because these are policy loans for livelihood stability, a condition is attached that real estate cannot be purchased for one year after execution of the loan or until the loan is fully repaid.
Some sectors say different incentives should be applied by sector to ensure a stable supply of loans. The card industry is calling for higher card loan limits. Card loans mainly serve low-credit customers, but cash services (short-term card loans) or mid-rate loans have a 10 million won limit, which they say cannot meet all demand.
Online investment-linked finance (P2P lending) argues that the individual investment limit should be raised. Because the P2P sector has no deposit-taking function, the logic is that it needs to attract more investment to ensure a stable supply of loans. A P2P sector official said, "Citing investor protection, the individual investment limit of 40 million won has been maintained for six years. Among financial products that guarantee similar returns, many have no investment limits."
Mid-rate loans supplied by the P2P sector in connection with savings banks saw about 100 billion won in originations increase in July alone, surpassing a cumulative 600 billion won. Compared with 10 years ago (12.3 billion won), the cumulative amount originated has increased about 50-fold. The July delinquency rate was 0.88%, up 0.13 percentage point (p) from the previous month, but it remains below 1%.
The financial authorities are cautious. An official said, "We should distinguish unsecured credit loans like card loans from policy-purpose mid-rate loans." The official added about the P2P sector, "Since the average individual investment size does not exceed 10 million won, it is hard to say the individual investment limit is low."