Self-Employed Loan Delinquency Rate 0%... "Found the Answer in Humanities" [Finance Inside]

Interview with Kwon Oh-hyung, CEO of Winkstone Partners
"Targeting niche markets... also key to tracking cash flow"

There is an online investment-linked finance company (OnTu business) that has maintained a delinquency rate of 'zero (0)' for six consecutive years. Since establishing a P2P (peer-to-peer) platform specializing in small business owners in 2018, Winkstone Partners has not experienced a single case of delinquency. This is a remarkable achievement amid the turmoil caused by prolonged high interest rates and widespread household and individual business loan defaults in the financial sector. On the 17th, we met Kwon Oh-hyung, CEO of Winkstone Partners, at Seoul Fintech Lab in Yeouido, Seoul, to learn the secret behind maintaining soundness while providing financial services to small business owners.

Oh Hyung Kwon, CEO of Winkstone Partners

Regarding the secret to maintaining a '0% delinquency rate,' CEO Kwon explained, “It is because we have targeted niche markets struggling with chronic cash flow shortages.” The retail market for imported car parts, which Winkstone has recently focused on, is a representative example. When an imported car is brought into a repair shop, the repair shop requests parts from a retailer, and the retailer, in turn, requests from a wholesaler. The wholesaler receives cash immediately upon selling imported parts to the retailer, but the repair shop pays the retailer only after completing the vehicle repair and insurance company review. Since the time lag between parts sales and payment collection can be up to two months, retail businesses face difficulties in managing their cash flow. CEO Kwon said, “This retail market, worth 2 trillion won, inevitably experiences cash shortages due to industry characteristics, not because of poor business performance. With the domestic market share of imported cars on the rise, we identified the absence of financial institutions providing services to this market and designed a credit loan product that pays the import parts purchase costs on behalf of retailers.”

The same applies to loans for clothing purchase funds (funds for bulk pre-purchasing of clothing) in the Dongdaemun fashion market. Online fashion sellers pay clothing purchase funds immediately to Dongdaemun wholesalers, but the payment from consumers for sold products does not come in immediately. As the business grows and purchase volumes increase, sellers find it harder to manage funds efficiently. This is why Winkstone entered the 'advance payment, deferred settlement' service for clothing purchase funds.

Winkstone has not only mediated small business loans but also succeeded in developing a differentiated credit evaluation model called 'WinkScanner.' Its predictive power exceeds 90%. CEO Kwon explained, “Most financial institutions evaluate the creditworthiness of small business borrowers by adding some financial data to existing credit evaluation models for salaried workers, but this method can miss many factors.” Instead, he proposed applying corporate valuation techniques to small business owners. To estimate future cash flows of small businesses, past sales trends are tracked by product category, and costs are analyzed by dividing them into variable and fixed costs. The model also incorporates industry analysis to identify competitive factors and macroeconomic indicators such as inflation rates.

CEO Kwon’s background in the humanities influenced his entry into the small business loan market. “I studied history in college. When looking at the development of politics, initially power was held by a few, but gradually it was shared among many. I thought finance follows a similar trend. In the past, banks mainly handled corporate finance, then retail loans for salaried workers opened up, and nowadays individuals invest in alternative assets like fractional ownership of buildings. We have entered a stage of financial democratization. I believed it was time to provide loans to those who previously could not borrow money. Since the founding of the nation, small business owners have always been in the financial blind spot, haven’t they?”

This idea became concrete while working as an accountant at Samil Accounting Corporation, auditing local financial institutions in the United States. CEO Kwon said, “What surprised me was that U.S. financial institutions handled many small business loans. What surprised me even more was that these loans were not as risky as expected. During the 2008 global financial crisis, real estate-secured loans became non-performing, but small business loans had few problems.” He added, “I decided to start this business based on the awareness that small business owners, who have been marginalized in Korea’s financial market for the past 70 years, have not received loans at reasonable interest rates. Just as the 'American Dream' comes to mind when thinking of the U.S., I thought that if Korea’s financial system develops, small business owners could gain self-sufficiency and opportunities for success.”

Winkstone plans to continue expanding its business by diversifying products in ways that break through 'financial stagnation.' CEO Kwon revealed, “Specifically, we are considering products that advance payments for pharmaceutical sales representatives’ commissions or fuel purchase funds for gas stations.” He also hinted, “In the mid to long term, we plan to acquire a savings bank through consortium formation to expand small business loans. We also intend to establish a credit evaluation subsidiary and export our credit evaluation model to Southeast Asia.”