As candidates for the 6th presidential election are successively presenting pledges for support policies for small businesses, a policy suggestion from a national policy research institution has emerged that caution should be taken regarding debt adjustment plans that forgive loans. It is pointed out that excessive debt adjustment programs can lead to moral hazard and increase social burdens.
The Korea Development Institute (KDI) suggested in its economic outlook for the first half of 2025, released on the 14th, that financial support for structurally unviable corporations should be restrained and that macro-prudential policies should be consistently pursued.
Specifically, it noted that "financial assistance for vulnerable sectors should be applied differentially, taking into account the repayment capacity of individual borrowers to minimize moral hazard."
In response to the question of whether this logic should be applied equally to individual entrepreneurs such as small businesses as well as corporations, Jeong Yu-cheol, head of KDI's economic outlook division, stated, "It can be applied to all parts," adding, "We need a differentiated policy approach depending on how much debt individuals can repay." He emphasized that providing debt adjustments or forgiveness in a discretionary manner should be avoided.
Currently, major presidential candidates are mentioning debt adjustments as part of support policies for small businesses.
Lee Jae-myung, the presidential candidate of the Democratic Party of Korea, stated that he would prepare a comprehensive plan from debt adjustment to forgiveness for the policy funding loans for small businesses, which is the third pledge among his ten policy commitments.
Kim Moon-soo, the candidate of the People Power Party, also pledged in the small business support policy announced the previous day to strengthen debt adjustments and support for the recovery of small business owners and self-employed individuals.