Dec 1.3422 trillion → May this year 1.1294 trillion
Impact of real estate market slump and safe asset preference
Delay in authorities' institutional investor guideline announcement
Industry "a matter of survival"... BidFunding suspends operations
As investment sentiment weakens and preference for safe assets continues, the loan volume of online investment-linked finance (OnTu business) has decreased by more than 200 billion KRW in half a year. With no progress in allowing institutional investments, which has been a long-standing wish of the OnTu industry, and cases of business suspension emerging one after another, the industry's sense of crisis is growing.
According to the OnTu Central Record Management Institution (P2P Center) on the 23rd, the total loan balance of 50 OnTu companies as of last month was 1.1294 trillion KRW. Compared to December last year (1.3422 trillion KRW), it decreased by 212.8 billion KRW. This figure has been declining for nine consecutive months since peaking at 1.4131 trillion KRW in August last year.
The sharp decline in the OnTu industry's loan volume is due to the real estate market slump. As housing prices fall and construction investment freezes, real estate-related loans, the main products of the OnTu industry, have shrunk. As of last month, real estate-related loans accounted for 70% of the industry's total loan balance (65% real estate secured loans + 5% real estate project financing (PF) loans). This is 4 percentage points lower than 74% in December last year (70% real estate secured loans + 4% real estate PF loans). The increased economic uncertainty and the movement of funds into safe assets are also among the reasons for the shrinking market size of the OnTu industry.
No Progress in Institutional Investment
The attraction of institutional investment, seen by the industry as an opportunity for growth, is not gaining momentum. Although the financial authorities issued a legal interpretation in April allowing institutional investment in OnTu businesses, no concrete implementation guidelines have been released yet, so it has not been implemented. The timeline for preparing the guidelines, initially expected in the first quarter, has been postponed to the second half of the year.
Industry anxiety is also increasing as companies declare business suspension one after another. Following the closure of Graph Funding last year, recently Bid Funding has expressed its intention to return its license to the Financial Supervisory Service and is proceeding with bond repayment procedures. Hi Funding and OnTuIn also have loan balances of zero, effectively suspending operations. An OnTu industry official said, “We expect the difficult situation to continue until the second half of the year,” adding, “Institutional investment is a matter of survival for the industry, so we are making every effort to resolve it within this year.”
OnTu business is a service that connects investors and borrowers through an online platform and was formerly called ‘P2P (Peer-to-Peer) finance.’ It entered the regulatory framework with the enforcement of the OnTu Business Act in August 2020.
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