Post Office Dreaming of Loan Business... Peeking at Saitdol

Korea Post Finance Development Institute Investigates Saitdol Loan Trends
"Considering Enhancing the Role as a State-Owned Financial Institution"
Growing Possibility of Entering the Credit Business Due to Financial Market Changes

[Asia Economy Reporter Song Seung-seop] The post office, which is not allowed to engage in lending business, has started efforts to monitor trends in mid-interest rate loans. It is understood that they have focused particularly on the Sae-itdol loan, which targets low-income individuals. However, there are internal doubts about whether this will actually produce positive synergy effects.

According to the financial sector on the 12th, four employees from the Post Office Financial Development Institute held a meeting with two officials from SGI Seoul Guarantee Insurance at the company's headquarters conference room on the 4th of last month to investigate the operational trends of the Sae-itdol loan. The Sae-itdol loan is a government-supported mid-interest rate loan product provided to medium- and low-credit borrowers. SGI Seoul Guarantee Insurance guarantees 100% of the loan principal.

The investigation was conducted in a format where the Post Office Financial Development Institute asked questions and SGI Seoul Guarantee Insurance responded. The topics included the current status of the Sae-itdol loan, guarantee support, guarantee fees, supply scale, and control measures. The report from that day included a forecast that the scale would decline due to the establishment of supply requirements, along with the information that financial authorities do not impose separate total volume restrictions.

There were also inquiries about profitability. SGI Seoul Guarantee Insurance explained, "Unlike policy-based low-income financial services (public interest projects) supplied after securing funds, the Sae-itdol loan operates as a profit-making business model using its own resources." They added, "Banks and mutual finance institutions may perceive it as a loss-making product due to poor marketability," and "Internet-only banks strategically handle Sae-itdol loans to expand lending scale by utilizing policy incentives and achieve economies of scale."

Since the post office lacks experience in lending business, questions were raised about the credit evaluation models of the Sae-itdol loan. SGI Seoul Guarantee Insurance replied, "We operate two proprietary credit evaluation models (for banks and savings banks)," and "We utilize alternative information such as telecommunications and insurance premiums in credit evaluations."

Can the Post Office, which cannot lend, succeed with Sae-itdol?

This investigation is intended as preparation for the post office's potential future entry into the lending business. Although it is currently impossible to handle loans under its own law, the possibility of regulatory changes has increased more than ever. The Presidential Transition Committee of President Yoon Seok-yeol has already decided to prepare measures allowing the post office to conduct banking operations. There is also growing support for the argument that state-owned financial institutions should play a larger role as bank branches decrease.

An official from the Post Office Financial Development Institute said, "There was consideration on how to enhance the role as a state-owned financial institution," adding, "Although mid-interest rate loans are primarily in the private sector, there is some public sector involvement, and we examined whether we could enter that area." They continued, "Since we cannot suddenly create lending products, we investigated the public product, the Sae-itdol loan."

It is also interpreted that they were mindful of opposition from the secondary financial sector. The post office conducted research in 2017 and prepared to launch loan products with interest rates ranging from 6% to 12%. At that time, heads of mutual finance institutions strongly opposed it by submitting petitions to the National Assembly, and the plan was eventually abandoned. On the other hand, the Sae-itdol loan has the justification of being a government-supported product and holds a small share in the overall loan market, thus avoiding criticism that it harms private finance.

However, it is known that there are internal disagreements about the post office handling lending. Another official expressed concern, saying, "In the case of the Sae-itdol loan, it is promoted more for the role of a state-owned financial institution than for profitability," and "There is a possibility that it could be a business loss."