Self-Employed Debt Reaches 730 Trillion Won... 30% Increase in Two and a Half Years

Amount of Debt Default by Self-Employed Increases Fourfold
Rep. Kim Seong-ju: "Difficulty in Principal and Interest Repayment"

Especially, Debt Default Amount in the Loan Industry Accounts for 40% of the Total
Loan Industry Debt Excluded from the New Start Fund

The total debt and defaulted debt of self-employed individuals have significantly increased over the past three years. According to data submitted by KCB (Korea Credit Bureau) to the office of Assemblyman Kim Seong-ju of the National Assembly's Political Affairs Committee on the 24th, the total debt of self-employed individuals up to the second quarter of this year was approximately 732.2037 trillion KRW. This represents a 30% increase compared to the end of 2020 (559.6053 trillion KRW).

The amount of defaulted debt is increasing at an even faster rate. It rose nearly fourfold from 2.4675 trillion KRW in 2020 to 9.4364 trillion KRW in the second quarter of this year. Assemblyman Kim stated, "These figures show that many self-employed individuals are struggling to repay principal and interest."

Assemblyman Kim pointed out, "The Financial Services Commission and Korea Asset Management Corporation (KAMCO) have been implementing a debt adjustment program called the ‘New Start Fund’ since October last year to alleviate the difficulties of self-employed individuals. However, loans from private lenders are excluded from the New Start Fund’s debt adjustment program." This is because private lenders refused to join the agreement at the launch of the New Start Fund, citing reasons such as the low purchase price of the fund causing losses.

According to NICE Credit Rating, as of the first half of this year, 15,613 self-employed individuals have taken loans from private lenders, of which 24% (3,702 individuals) are in default. The total debt of self-employed individuals in the private lending sector reached 650 billion KRW by the second quarter of this year, more than doubling from 273.9 billion KRW in 2020. The amount of defaulted debt also increased 2.5 times from 104.4 billion KRW to 255 billion KRW.

Assemblyman Kim urged, "What is most serious is that 40% of the defaulted debt of self-employed individuals is in the private lending sector. Continuous communication and providing incentives to the private lending sector are necessary to encourage their participation in the New Start Fund agreement."