South Korea’s internet-only banks are accelerating efforts to grow lending to sole proprietors as they look for new revenue sources. With major commercial banks taking a more cautious approach to such loans to manage asset quality, online lenders are moving to capture niche demand and diversify their portfolios.
According to the financial industry on Saturday, KakaoBank since Feb. 2 has added a new three-year maturity option to its real estate-backed loan for sole proprietors, which has a maximum limit of 1 billion won. The bank previously offered only 5-, 10-, 15- and 20-year terms, but expanded choices as demand for short-term funding has grown. It also added a bullet repayment option alongside installment repayment, allowing borrowers to reduce monthly payments.
Toss Bank, which has not yet launched a collateralized loan, is strengthening its lineup with unsecured products aimed at specific sole proprietors. On Feb. 5, it introduced a “professional sole proprietor loan” for nine licensed professions, including doctors, lawyers and accountants. The bank said it can automatically verify license and certification information through a non-face-to-face process.
K Bank moved first among internet-only banks by launching a real estate-backed loan for sole proprietors and has sought to add customers by expanding refinancing so borrowers can switch from loans at most regulated financial institutions. It is promoting competitive terms, including an average interest rate about 1 percentage point lower than major commercial banks.
The push reflects the need to sustain growth as financial regulators continue to tighten oversight of household lending, limiting asset growth for internet-only banks that have relied heavily on consumer loans. Loans to sole proprietors are seen as a new growth area because they are relatively less affected by those rules.
Demand is also shifting as South Korea’s five largest banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — have raised rates or tightened screening for sole proprietor loans amid concerns about weakening asset-quality indicators. As of the end of last year, the five banks’ outstanding sole proprietor loans totaled 324.4325 trillion won, down 0.4% from a year earlier. Over the same period, KakaoBank’s outstanding sole proprietor loans, including real estate-backed and unsecured loans, rose 61.3% to 3.0550 trillion won. K Bank’s total outstanding sole proprietor loans also doubled.
“Because growth strategies centered on household lending are becoming difficult, we have no choice but to expand corporate credit, especially financing for sole proprietors,” an internet-only bank official said. “Non-face-to-face financial services that improve convenience for sole proprietors will continue to be introduced.”
* This article has been translated by AI.
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