Activation of Government Support for Low-Income Financial Services
Shinhan Card's Q3 Mid-Interest Loan Performance
Up 972.6% Year-on-Year
[Asia Economy Reporter Ki Ha-young] The card industry has increased mid-interest rate loans provided to middle-credit borrowers with credit ratings of 4 to 6 last year. This is the result of the financial authorities' activation of support for low-income finance and the expansion of Environmental, Social, and Governance (ESG) management.
According to the industry on the 27th, Shinhan Card recorded mid-interest rate loan performance of 215.6 billion KRW as of the third quarter of last year, a 972.6% increase compared to 20.1 billion KRW the previous year. This is a nearly tenfold surge. It is explained that mid-interest rate loans were expanded considering the impact of the novel coronavirus disease (COVID-19) and the group's ESG strengthening strategy.
From the perspective of inclusive finance, the financial authorities allowed mid-interest rate loans from the secondary financial sector, which had been restricted after the total household loan volume regulation, starting in October 2018. The existing mid-interest rate loan rates were common across all financial sectors with an 'average interest rate of 16.5% or less and a maximum interest rate below 20%', but from the third quarter of 2019, new mid-interest rate loan rates were applied by sector. Accordingly, card companies are recognized as mid-interest rate loans if the 'average interest rate is 11.0% or less and the maximum interest rate is below 14.5%.'
Although the 2019 performance was only reflected for six months as the financial authorities recognized mid-interest rate loans from the third quarter, it is evaluated that Shinhan Card's mid-interest rate loans clearly increased last year. Not only Shinhan Card but also KB Kookmin, Lotte, Woori, and Hana Cards, which handled mid-interest rate loans last year, saw an increase in mid-interest rate loan performance.
KB Kookmin Card's mid-interest rate loan product that meets the financial authorities' new standards, 'KB Kookmin Saenghwal Deundeun Loan 2,' had a 2019 performance of 93.4 billion KRW. This amount is about five times larger than Shinhan Card's. This year, the performance of mid-interest rate loan products has increased by about 10% each quarter compared to this. Lotte Card and Woori Card also reported that their mid-interest rate loan performance increased compared to the previous year. Hana Card started mid-interest rate loans from the fourth quarter of 2019 and officially began last year, so it is expected that performance will increase from this year.
An industry official said, "Due to the absence of total household loan volume regulation last year because of COVID-19, and encouragement of loans for self-employed and small business owners, mid-interest rate loans also increased," adding, "From the perspective of strengthening low-income finance, the financial authorities are promoting the supply of mid-interest rate loans, and as each financial sector emphasizes ESG management, mid-interest rate loans are expected to expand this year as well."
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