[Exclusive] 'Self-Loan' Controversy, NongHyup Mutual Finance Agricultural Land Mortgage Loans Increase 22.5% in Q1

NongHyup Bank → Mutual Finance Concentration Deepens
With LH Scandal Tightening NongHyup Bank
Mutual Finance Farmland Loans Greatly Increase

(Source: Yonhap News TV captured screen)

[Asia Economy Reporters Kwangho Lee and Chae-eun Koo] As the land speculation allegations involving Korea Land and Housing Corporation (LH) have escalated into a ‘self-loan’ issue within regional Nonghyup cooperatives, it has been revealed that agricultural land mortgage loans from Nonghyup Mutual Finance have significantly increased. Analysts interpret this as a balloon effect, where demand has shifted to Nonghyup Mutual Finance, a secondary financial institution, after NH Nonghyup Bank tightened regulations on agricultural land mortgage loans amid the LH land speculation scandal.

According to the ‘NH Nonghyup Bank and Nonghyup Mutual Finance Agricultural Land Mortgage Loan Status from 2016 to 2021,’ exclusively obtained by Asia Economy on the 13th through the office of Yoon Chang-hyun, a member of the National Assembly’s Political Affairs Committee from the People Power Party, Nonghyup Mutual Finance’s agricultural land mortgage loan amount in the first quarter of this year was 4.9472 trillion KRW, marking a 22.5% increase compared to the same period last year (4.0366 trillion KRW). Considering that the growth rate in the first quarter of last year was 19.22%, agricultural land loans from Nonghyup Mutual Finance have actually increased despite the LH employee speculation allegations. Agricultural land mortgage loans from regional Nonghyup cooperatives had been used as a loan channel for land speculation by some LH employees.

(Source: Yoon Chang-hyun, Office of the People Power Party, NongHyup Central Association Mutual Finance Loan Support Department)

The number of borrowers also rose significantly. The number of borrowers, which was 28,592 in the first quarter of last year, exceeded 30,000 for the first time, reaching 30,467 in the first quarter of this year. The market views this as a balloon effect where loan demand shifted to Mutual Finance as Nonghyup Bank imposed regulations on agricultural land loans. In fact, the amount of agricultural land mortgage loans from Nonghyup Bank slightly decreased. It stood at 13.6951 trillion KRW in the first quarter of this year, only a 7.92% increase compared to the same period last year (12.6897 trillion KRW). This is a decrease compared to last year’s growth rate of 7.95%. The growth rate of Nonghyup Bank’s agricultural land mortgage loans (based on the first quarter) gradually declined from 15.01% in 2016, 18.13% in 2017, 16.69% in 2018, and 10.89% in 2019, dropping to single digits since last year.

The trend is similar when viewed by year. Nonghyup Bank’s agricultural land mortgage loan growth rates were double digits at 17.1% in 2016, 17.28% in 2017, and 12.48% in 2018, but decreased to 7.47% in 2019 and 7.71% in 2020. In contrast, Nonghyup Mutual Finance’s loan growth rate, which remained in single digits at 7.82% in 2018 and 1.58% in 2019, rose to 19.24% in 2020.

This is interpreted as an effect of efforts to curb agricultural land mortgage loans, which became controversial due to the LH land speculation scandal. Nonghyup Bank strengthened the total debt service ratio (DSR) cap applied to agricultural land mortgage loans from 300% to 200%. Representative Yoon stated, “Since Nonghyup Bank began regulating agricultural land loans, demand has shifted to Mutual Finance units at the cooperative level,” and added, “It is necessary to establish guidelines at the Nonghyup Central Association level to prevent conflicts of interest involving public officials and cooperative personnel and to maintain the soundness of cooperatives.”

Meanwhile, on the 12th of this month, the Financial Supervisory Service began investigating after identifying signs that some executives and employees of regional Nonghyup cooperatives in Gyeonggi Province, including Buksiheung Nonghyup and Bucheon Livestock Nonghyup, engaged in self-loans for real estate speculation such as agricultural land. Authorities found that several executives and employees took out mortgage loans under the names of spouses or third parties to purchase agricultural land and commercial properties in areas like Siheung, and some were directly involved in the loan screening process, enabling self-loans. This violates the loan regulations for executives and employees stipulated in the Nonghyup Central Association’s internal loan operation manual and is subject to sanctions by financial authorities.

On the 5th, in front of the LH Corporation Seoul Regional Headquarters in Gangnam-gu, Seoul, officials affiliated with the National Demolition Residents Council held a press conference urging the dismantling of LH, the establishment of a Housing Agency, and the stabilization of housing for low-income residents. Photo by Kang Jin-hyung aymsdream@