Self-Employed Struggling with Debt... Loans Increased 51% Before and After COVID-19

A rental notice is posted at a store in Insadong, Jongno-gu, Seoul. Photo by Jin-Hyung Kang aymsdream@

Loans from financial institutions to self-employed individuals have surged by 51% over four years since the COVID-19 pandemic.

According to the "Status of Household and Business Loans for Individual Business Owners" data submitted by NICE Information Service to Yang Kyung-sook, a member of the Democratic Party of Korea, as of the end of March, 3,359,590 individual business owners (self-employed) held a total of 1,112.74 trillion KRW in financial institution loans (household loans + business loans).

Compared to the end of 2019, just before the COVID-19 outbreak (2,097,221 people; 738.06 trillion KRW), the number of borrowers and the loan amount increased by 60% and 51%, respectively, over four years and three months.

In particular, the total loan amount held by borrowers at risk of default (defined as overdue for more than three months) nearly doubled during the same period, rising from 15.62 trillion KRW to approximately 31.3 trillion KRW.

The recent pace of increase in loans among delinquent borrowers has accelerated further, surging 53.4% in just one year compared to the end of March last year (20.4 trillion KRW).

The situation was even worse for self-employed "multiple debtors," who have borrowed the maximum from three or more financial institutions, making additional loans or refinancing practically impossible.

As of March, the total number of multiple-debt individual business owners was 1,727,351, accounting for more than half (51.4%) of all individual business loan borrowers (3,359,590 people).

The number of multiple-debt individual business owners and their loan amounts increased by 62% and 60%, respectively, compared to the end of 2019 (1,066,841 people; 431.31 trillion KRW), and the loan balance of delinquent multiple-debt individual business owners more than doubled from 12.12 trillion KRW to 24.75 trillion KRW.