[Asia Economy Reporter Kiho Sung] KakaoBank announced on the 27th that it plans to participate as a major shareholder in the Data-Based Mid-Interest Rate Market Innovation Preparation Corporation (Mid-Interest Rate Innovation Corporation), which is preparing for the personal business credit evaluation business.
The Mid-Interest Rate Innovation Corporation includes Korea Credit Data, the operator of the ‘Cash Note’ service used by 800,000 businesses nationwide, and KakaoBank as the core shareholders, along with SGI Seoul Guarantee, KB Kookmin Bank, Hyundai Capital, Jeonbuk Bank, and Welcome Savings Bank as shareholder companies. The initial capital is approximately 10 billion KRW, and KakaoBank’s shareholding ratio is 33%.
On the 25th, the Mid-Interest Rate Innovation Corporation, which applied for a preliminary license for the personal business credit evaluation business, is expected to become the first dedicated personal business credit evaluation company in Korea upon approval by the Financial Services Commission. To this end, KakaoBank will proceed with the supervisory authority’s approval process before investing in the Mid-Interest Rate Innovation Corporation.
The Mid-Interest Rate Innovation Corporation plans to develop innovative credit evaluation models for personal businesses based on financial and non-financial data from shareholder companies, making them available for use by financial institutions. Currently, credit evaluations for personal businesses are mainly based on the personal credit information of the business owner. Intangible and tangible competitive factors possessed by the business are not properly reflected in credit evaluations.
As a result, about half of personal businesses are classified as medium- to low-credit borrowers and use loans with high interest rates. According to a survey by the Mid-Interest Rate Innovation Corporation, only some personal businesses with high personal credit scores receive loans with an annual interest rate of 7% or less, while the majority are subject to high interest rates of 11% or more.
KakaoBank plans to accelerate financial innovation for personal businesses through participation in the Mid-Interest Rate Innovation Corporation.
Kim Kwang-ok, Head of the Mid- to Low-Credit Borrower Loan Expansion Task Force (Vice President) at KakaoBank, said, “Top companies in the industry are participating as shareholders, and we believe the capabilities and know-how of the shareholder companies can contribute to expanding financial inclusion for personal businesses, so we decided to participate in the Mid-Interest Rate Innovation Corporation. We decided to participate as the second-largest shareholder to play a more leading role.”
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