Omicron Shock... Surge in Loans for Small Businesses and Self-Employed in January

Analysis of January Loan Status at 5 Major Banks

Household Loans Decreased for the First Time in 8 Months

SME Loans Show Largest Increase in Half a Year
After Declining Since October Last Year,
Loans Increased by Over 6 Trillion Won in January Alone

On the 4th, known as 'Ipchun,' which marks the beginning of spring according to the solar calendar, the streets of Myeongdong in Seoul felt bleak. On this day, the government decided to extend the current social distancing measures, which allow private gatherings of up to six people and restrict business operations after 9 p.m., for two more weeks to slow the spread of the Omicron variant of COVID-19. Photo by Moon Honam munonam@

[Asia Economy Reporter Sim Nayoung] While the household loan balance of the five major commercial banks decreased for the first time in eight months in January, loans to small and medium-sized enterprises (SMEs) significantly increased.

According to KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks on the 5th, the household loan balance of the five major banks as of the 31st of last month was recorded at 707.6895 trillion won. This is 1.3634 trillion won less than the end of December last year (709.0528 trillion won). By loan type, mortgage loans including jeonse deposit loans increased by 1.4135 trillion won. Credit loans decreased by 2.5151 trillion won. Jeonse deposit loans also decreased by 181.7 billion won.

The halt in loan growth was due to a combination of factors including reduced borrowing limits, rising loan interest rates, and difficulty finding profitable investment opportunities with borrowed funds. The DSR (Debt Service Ratio) regulation, which limits borrowers' principal and interest repayment amount to 40% of their annual income, was applied from January for total loans exceeding 200 million won, reducing the amount that can be borrowed.

On the other hand, SME loans, including those to small business owners, surged due to the impact of the COVID-19 recession. The explosive increase in Omicron cases reflected from the first month of the new year. The SME loan balance (including individual business owner loans) in January was recorded at 559.7387 trillion won. This is an increase of 6.2602 trillion won compared to the previous month, marking the largest increase in six months since July last year. The increase in SME loans had been declining since October last year (October 5.9529 trillion won → November 4.6513 trillion won → December 1.8691 trillion won) but turned to an upward trend from January.

Looking at individual business owner loans separately, they only increased by 973.8 billion won in December compared to the previous month, but surged by 1.6854 trillion won in January. A commercial bank official said, "As the COVID-19 situation worsened, management and business restrictions became severe, and with facility investment funds coming in at the start of the new year and the Lunar New Year holiday overlapping, SME loans increased significantly. Additionally, as household loan regulations tightened, banks actively pursued SME loan business," he explained.