Last year, the loan arrears rate among sole proprietors hit a record high. Analysts said the increase stemmed from a rise in self-employed borrowing during COVID-19 and the relatively high base rate in 2023–2024, which stayed in the 3% range.
According to the "2024 administrative employment statistics on sole proprietors' liability (provisional)" data released by the National Data Agency on the 22nd, the arrears rate for sole proprietors (based on outstanding loan balance) stood at 0.98% as of the end of December last year. That is the highest level since the statistics began in 2017.
The arrears rate edged down from 0.40% in 2020 to 0.31% in 2021, but then climbed sharply to 0.36% in 2022 and 0.65% in 2023, surging to nearly 1% last year. It has almost tripled in four years.
A National Data Agency official said, "After the base rate rose to 3.5% in Feb. 2023, it did not come down to 3.25% until Oct. 2024," and noted, "Borrowing by the self-employed increased during crises such as COVID-19, and because the economy has not recovered, cases emerged where self-employed people could not repay their loans."
Signs of distress were more pronounced among microbusinesses. The arrears rate for one-person businesses with no employees (1.00%) was more than three times that of businesses with employees (0.32%). The arrears rate for microbusinesses with less than 30 million won in sales reached 2.03%, more than seven times that of businesses with 1 billion won or more (0.28%).
By industry, construction had the highest arrears rate at 1.93%. It was followed by business support and leasing (1.31%), agriculture, forestry and fisheries (1.29%), arts, sports and leisure (1.12%), and lodging and food service (1.07%). The arrears rate rose year over year across all industries.
By age group, the arrears rate was highest among business owners age 29 and under at 1.29%, followed by those in their 50s (1.04%) and 40s (1.03%). The arrears rate rose year over year in all age groups.
Last year, the average loan amount for sole proprietors was 178.92 million won, down a slight 0.2% (300,000 won) from a year earlier. However, concerns about deterioration are mounting in the secondary financial sector, with the nonbank arrears rate reaching 2.10%, 11 times that of banks (0.19%).