Self-employed individuals who have endured the shock of the COVID-19 pandemic and sluggish consumption are facing a limit. Despite borrowing more than 1,064 trillion won from financial institutions, they are unable to repay over 18 trillion won in principal and interest. Both the outstanding loan balance and the amount in arrears have reached the largest scale since statistics were first compiled.
According to the 'Self-Employed Loan Status' data submitted by the Bank of Korea to the National Assembly's Strategy and Finance Committee member Park Seong-hoon of the People Power Party on the 29th, the total loan balance of self-employed individuals with financial institutions in the third quarter (end of period) was tallied at 1,064.4 trillion won. This is the highest record since the related statistics count started in 2012.
This self-employed loan status is the result of analysis conducted by the Bank of Korea using its own household debt databases (approximately 1 million borrower panel data), considering personal business loan holders as self-employed, and combining their personal business loans with household loans.
The loan growth rate for the self-employed dropped to 0.1% in the fourth quarter of last year, appearing to calm the rapid increase. However, it rebounded to 0.3% in the first quarter of this year and maintained 0.4% in both the second and third quarters, generally rising once again.
Breaking down self-employed loans by type, business loans amounted to 711.8 trillion won, while household loans were 352.6 trillion won. By debtor, the loan balance of multiple debtors at the end of the third quarter was 754.4 trillion won, the highest since the third quarter of last year (755.6 trillion won). A total of 1,774,000 people carried an average loan of 430 million won per person. A multiple debtor is defined as a borrower with three or more household loan institutions and personal business loan products combined.
The arrears of self-employed individuals (based on one month or more of principal and interest arrears) were estimated at 18.1 trillion won at the end of the third quarter. This is an increase of 2.2 trillion won from the end of the second quarter (15.9 trillion won), setting a new record. As of the third quarter, the overall arrears rate of self-employed individuals with financial institutions rose to 1.70%, up 0.20 percentage points from the second quarter (1.50%). The rate of 1.70% is the highest in nine years and six months since the first quarter of 2015 (2.05%).
The arrears rate of personal business loans, as directly reported by financial institutions in their business reports, is also on the rise. According to the Bank of Korea's data, as of the end of the third quarter, the arrears rate for self-employed individuals by financial sector was ▲bank 0.61% ▲non-bank overall 4.74% ▲mutual finance 4.37% ▲insurance 1.28% ▲savings banks 11.0% ▲credit finance companies (capital and card companies) 2.94%.