Small business owners who struggled to get bank loans due to limited financial transaction histories will be able to receive preferential treatment in loan approvals, interest rates, and limits if they are recognized for rising sales, commercial district competitiveness, business growth potential, and the like.
On the 2nd, according to the Financial Services Commission, Chairperson Lee Eog-weon visited Industrial Bank of Korea (IBK)(024110) Gwanghwamun branch in Seoul to review how the banking sector's pilot operation of the "Small Business Credit Bureau (SCB)" is progressing.
SCB is an artificial intelligence (AI)-based credit evaluation system that assesses the future growth potential of small business owners by using nonfinancial information such as sales, industry, and commercial districts, in addition to existing financial transaction histories. It also uses factors such as business duration, number of workers, customer recognition and demand, and data on visits, revisits, and bookmarks on online distribution platforms.
When the Korea Credit Information Services calculates a small business owner's "growth grade (S grade)" based on this information, a credit bureau combines the existing credit grade with the growth grade to provide a "growth credit grade" to financial companies. Small business owners with high growth grades can receive benefits such as loan approvals, higher limits, and lower interest rates by being assigned grades higher than in conventional credit evaluations.
From the 31st, eight banks—including Kookmin, corporations, NongHyup, Busan, Shinhan, Woori, Jeju, and Hana Bank (in Korean alphabetical order)—started the SCB pilot operation. Gyeongnam, Gwangju, Suhyup, iM, and Jeonbuk Bank, as well as Kakao, K Bank, and Toss Bank, are also set to join in the second half of this year. The pilot scale has been expanded from 7 banks and 1.8 trillion won to 16 banks and 2.2 trillion won.
In the banking sector's preliminary reviews, there have been cases where actual loan terms improved. A coffee shop operator who had been denied a loan after receiving a grade 7 due to insufficient credit history was approved after applying SCB, moving up to grade 6 by being recognized for growth potential and repayment capacity.
An online retail operator received a top SCB grade and secured 30 million won in business funds at an annual interest rate in the 3% range after a 1 percentage point rate cut. Another wholesale and retail operator saw the loan limit rise by 10 million won, from about 30 million won to 40 million won under the previous criteria, while the rate fell by about 0.7 percentage points.
The financial authorities expect SCB to ease the problem of growth-oriented small business owners being excluded from bank loans solely because they lack collateral or financial transaction histories. The Financial Services Commission plans to expand SCB-applied products and participating financial companies after about a year of pilot operation through the second half of next year and an analysis of the results. It is also pushing to apply SCB to the personal business owner–only "Saitdol Loan" slated for release in Oct. and to the screening and evaluation of the Regional Credit Guarantee Foundation next year.
Chairperson Lee Eog-weon said, "In inclusive finance, it is also important to establish fair and reasonable systems so that capable people are not pushed out without even a chance to compete," adding, "SCB, which evaluates growth potential based on nonfinancial data such as sales, industry, commercial districts, and business characteristics, aligns with this purpose."