As loans to self-employed individuals from savings banks decline, delinquency rates are rising. The balance of personal business loans has nearly halved in three and a half years, while the delinquency rate has surged 3.6 times. The delinquency rate for vulnerable self-employed individuals has also exceeded 12%, with more than 80% of delinquent borrowers unable to repay their debts in the next quarter, indicating ongoing repayment burdens.
According to the financial sector on September 30, the balance of personal business loans from savings banks decreased from 24.2258 trillion won at the end of 2022 to 12.6049 trillion won in June of this year. This marks a reduction of 11.6209 trillion won (48%) over three and a half years. While the five major banks saw a slight increase in personal business loans from the end of June to September 28, savings banks have shown a long-term contraction in loan amounts.
In contrast, the delinquency rate for personal business loans from savings banks rose from 3.31% in 2022 to 11.94% in June of this year, an increase of approximately 3.6 times, with a rise of 8.63 percentage points.
This trend is concerning, particularly as savings banks are primarily sought after by borrowers with lower credit ratings. The combination of high interest rates and sluggish domestic demand has raised concerns about the financial health of self-employed individuals, as both loan amounts decrease and delinquency rates increase.
The delinquency rate for vulnerable self-employed individuals remains high. In the second quarter of this year, the delinquency rate for these borrowers was 12.71%, the highest level since it peaked at 13.27% in the first quarter of last year. During the same period, the overall delinquency rate for self-employed individuals was approximately 6.4 times lower at 1.99%. The number of vulnerable self-employed individuals has also increased, with 411,000 borrowers reported at the end of the second quarter, up by 7,000 from the end of last year.
The proportion of self-employed individuals who remain in delinquency after falling behind has also risen. The delinquency continuation rate for all self-employed borrowers increased from 78.4% at the end of last year to 80.9% in the second quarter of this year, a rise of 2.5 percentage points. This indicates that more than 80% of borrowers who were delinquent in the previous quarter remain in that state.
Self-employed individuals' outlook on the economy is also dimming. The Consumer Sentiment Index (CSI) for future economic prospects among self-employed individuals fell to 82 in September, down one point from the previous month. This marks a decline for three consecutive months, dropping from 88 in June to 87 in July, 83 in August, and now 82 in September.
There is also a prevailing view that debt levels will continue to rise. The CSI for household debt outlook among self-employed individuals stands at 103, remaining above 100 for seven consecutive months. This is eight points higher than the figure for salaried workers (95), indicating a significant difference in debt expectations.
Professor Yang Jun-seok of Catholic University’s Department of Economics predicts, “In a K-shaped polarization like the current situation, the financial health of vulnerable borrowers may deteriorate more rapidly.”
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.