"7 out of 10 SMEs Cite 'High Loan Interest Rates' as Biggest Challenge... Concerns Over Deepening Risks"

Korea Federation of SMEs, Survey on Financial Usage Difficulties
"Need for Policies to Ease Interest Burden" 46.4%
"Call for Financial Sector to Restrain Excessive Loan Interest Rate Increases"

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] Seven out of ten small and medium-sized enterprises (SMEs) that require external funding identified high loan interest rates as their biggest challenge.

The Korea Federation of SMEs announced the results of the "Survey on Financial Difficulties of SMEs Due to the Complex Economic Crisis," conducted on 500 SMEs, on the 16th.

According to the survey, SMEs cited high loan interest rates (67.1%) as the main difficulty in securing external funding (multiple responses allowed), indicating a significant risk from high interest rates.

In fact, SMEs reported that their financing interest rates increased by 2.2 percentage points compared to the beginning of the year (from 2.9% to 5.1%), which is higher than the increase in the base interest rate during the same period (1.75 percentage points).

When asked about future interest rate increases, the highest response was that if rates rise by "less than 2-3 percentage points (37.5%)," they would be unable to repay and would fall into delinquency. This was followed by "less than 3-4 percentage points (28.6%)" and "4 percentage points or more (25.5%)."

For companies with sales under 3 billion KRW, 11.3% responded that repayment would be difficult if interest rates rise by "less than 1-2 percentage points," which was relatively high.

Regarding the most needed financial policies, 80% of SMEs selected interest rate-related measures: "Policies to ease interest burden (46.4%)" and "Refraining from raising loan interest rates above the base rate (33.6%)." Next were "Expansion of new loan funds (10.6%)" and "Establishment of long-term installment repayment systems for loans (5.0%)."

Choo Moon-gap, Head of the Economic Policy Division at the Korea Federation of SMEs, stated, "The risk from high interest rates is expected to worsen due to loan interest rates rising more steeply than the base rate."

He emphasized, "The government’s active financial support, such as interest subsidies and low-interest refinancing loans, along with the financial sector’s restraint from excessive loan interest rate hikes, must work together to resolve the high interest rate difficulties faced by SMEs."