From the 5th, an average of 800,000 KRW interest refund for 1.88 million small business owners

Full Implementation of 3-Part Set to Reduce Interest Burden
No Separate Application Procedures for Documents Needed

Starting February 5, interest refunds (cashbacks) from banks for small business owners will be fully implemented. The banking sector expects that approximately 1.88 million small business owners will receive an average interest refund of 800,000 KRW per person through this livelihood financial support policy.

The Financial Services Commission and the Korea Federation of Banks announced on the 31st that they will fully implement the "Three-Set Package to Reduce Interest Burden for Small Business Owners." This concretizes the "2 trillion KRW + α" livelihood financial support plan announced by the banking sector at the end of last year.

On the 23rd, as domestic market interest rates and bank loan interest rates rapidly rise, a banner displaying loan interest rates is hung on the exterior wall of a commercial bank in Seoul. Photo by Jinhyung Kang aymsdream@

First, interest refunds for small business owners using personal business loans (excluding real estate rental businesses) at banks will begin on February 5. As of the end of last year, about 1.87 million borrowers who have paid interest for more than one year will receive a total refund of 1.36 trillion KRW. The average refund amount per person is about 730,000 KRW. These borrowers will receive the full scheduled refund amount at the first refund.

For borrowers who have paid interest for less than one year as of the end of last year, the interest paid last year will be refunded at the first refund, and the interest paid this year will be refunded quarterly for up to one year. The amount to be refunded quarterly this year to these borrowers is 140 billion KRW. Including them, the total number of small business owners eligible for interest refunds from banks is about 1.88 million, with a total scale of 1.5 trillion KRW (an average of about 800,000 KRW per person).

The initial refund will take place over four days from February 5 to 8. Before the refund, the banks where the transactions were made will notify borrowers of the refund amount and schedule via text messages or application push notifications starting tomorrow. No separate application procedure is required for the interest refund.

Lee Tae-hoon, Executive Director of the Korea Federation of Banks, emphasized, "The interest refund project for small business owners by banks does not require a separate application process," adding, "If documents submission or additional loans are requested for this, it is likely to be voice phishing, so please be cautious."

The banking sector also decided to provide 600 billion KRW, 200 billion KRW more than originally planned, to support vulnerable groups such as low-income households. The detailed plan for supporting vulnerable groups will be finalized by the end of March and implemented from April.

Interest cashback for borrowers in small financial sectors such as savings banks, mutual finance, and specialized credit finance companies will also start from the end of March. The support targets are individual business owners and small corporations holding business loans with interest rates between 5% and less than 7% in the small financial sector as of December 31 last year. Some industries, such as real estate rental businesses, are excluded from support. The estimated number of beneficiaries is about 400,000.

The maximum loan amount eligible for interest support is 100 million KRW, and the maximum refund amount per person is 1.5 million KRW. Unlike the automatic cashback in the banking sector without any application, interest refunds in the small financial sector are paid only when the borrower applies, on the last day of each quarter (March 29, June 28, September 30, December 31). Borrowers who have paid interest for more than one year as of the last day of each quarter will receive one year's worth of refund at once.

The authorities will also expand and reform the low-interest refinancing program. So far, about 23,000 cases (about 1.3 trillion KRW) of high-interest loans (7% or higher) for small business owners have been converted to low-interest loans (5.5% or lower) through the refinancing program. The average interest rate of users before refinancing was 10.0%, and after refinancing, it dropped to 5.48%, reducing the annual interest burden by about 4.58 percentage points.

The authorities will extend the initial eligibility date for this low-interest refinancing program to May 31, 2023, when the COVID-19 crisis level was still "severe," by one year. Additionally, after refinancing, the loan interest rate will be capped at 5.0% (previously 5.5%) for one year, and the guarantee fee of 0.7% will be waived, further reducing the cost burden by up to 1.2%. The revised refinancing program is scheduled to be implemented in the first quarter of this year.

The financial authorities stated, "The government and the financial sector are preparing thoroughly to ensure there are no disruptions in support, and will continue to strengthen the social role of the financial sector and policy support efforts to contribute even a little to the difficult livelihood economy going forward."