As the economy recovers, driven by semiconductors and artificial intelligence, financial resources are increasingly flowing to large corporations and advanced industries. In contrast, small and medium-sized enterprises (SMEs) focused on domestic markets are facing higher loan barriers, exacerbating financial polarization.
According to the financial sector on May 28, the outstanding loans to large corporations from the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) reached 179.1 trillion won as of the end of March, marking a 5.12% increase (8.71 trillion won) from the end of last year. In comparison, loans to SMEs, including small business loans, only rose by 0.94% (6.34 trillion won) during the same period.
Recent trends show that large-scale investments and operational funding demands are continuing in export-driven manufacturing sectors such as semiconductors, defense, and automotive. Consequently, banks are expanding credit primarily to financially strong companies. Data from the Financial Supervisory Service indicates that the total debt of the five largest conglomerates—Samsung, Hyundai Motor, SK, Lotte, and LG—was 395.8 trillion won last year, accounting for over half (53.2%) of the total debt of 42 conglomerates.
The state-run Korea Development Bank has also accelerated support for advanced industries, launching a special program last year to provide 17 trillion won for semiconductor facility investments over three years. Analysts suggest that the influx of policy financing and private bank funds into advanced manufacturing is creating a relatively favorable funding environment.
Conversely, SMEs, particularly those in domestic sectors, are experiencing rapidly deteriorating funding conditions due to prolonged high interest rates and economic slowdown. Banks are adopting a more cautious approach to lending to SMEs, which often rely heavily on collateral and have unstable cash flows, as they focus on managing delinquency rates and reducing default risks.
Particularly affected is the real estate sector, which has faced project financing defaults due to the fallout from the Russia-Ukraine war that began in 2022. This has led to a withdrawal of support not only from commercial banks but also from savings banks, which are typically the last resort for funding. The outstanding loans from savings banks to the real estate sector fell by 29.1%, from 23.1 trillion won in 2023 to 16.4 trillion won last year.
As bank loans become scarce, some vulnerable sectors are being pushed toward non-bank financing or non-debt funding methods. Recently, companies have been increasingly utilizing non-debt liabilities such as price return swaps (PRS), purchase card securitization, and check securitization to secure funds. This approach involves converting accounts receivable or credit card receivables into cash instead of relying on bank loans. The amount raised through non-debt liabilities was below 10 trillion won in 2022 but steadily increased to 27.5 trillion won last year.
Kim Jeong-ho, head of the Financial Stability Division at the Bank of Korea, stated, "While corporate funding through loans and direct financing has been sluggish, the use of non-debt liabilities is on the rise. Since these liabilities are often utilized by vulnerable sectors and non-viable companies, their defaults could trigger a broader deterioration in funding conditions across related industries."
* This article has been translated by AI.
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