"Self-Employed Struggle with Debt"... 11 Trillion Won in Business Loan Delinquencies

The amount of overdue business loans that self-employed individuals have failed to repay has reached an all-time high.

According to the "Quarterly Status of Loans for Self-Employed and Household Borrowers" data submitted by the Bank of Korea to Yang Bu-nam, a member of the National Assembly's Public Administration and Security Committee (Democratic Party), as of the end of the first quarter of this year, the total overdue amount (principal and interest overdue for more than one month) of business loans from all financial institutions for the self-employed was recorded at 10.8 trillion won. This is the largest overdue amount since related statistics began in 2009.

The delinquency rate for business loans from all financial institutions for the self-employed also rose by 0.33 percentage points in three months, from 1.30% in the fourth quarter of last year to 1.66% in the first quarter of this year. This is the highest level in 11 years since the first quarter of 2013 (1.79%).

Including household loans, the total outstanding loan balance for the self-employed from all financial institutions was estimated at 1,055.9 trillion won as of the end of the first quarter (business loans 702.7 trillion won + household loans 353.2 trillion won). This is the largest ever, increasing by 2.7 trillion won from the previous quarter (1,053.2 trillion won).

The Bank of Korea used its own household debt database (approximately 1 million loan panel data) to consider holders of individual business loans as self-employed and summed their household loans and individual business loans to estimate the total loan size for the self-employed across all financial institutions.

In a recent Financial Stability Report, the Bank of Korea emphasized, "Since pressure for rising delinquency rates centered on the self-employed is expected to continue for the time being, financial authorities need to actively promote debt restructuring through new start funds for self-employed individuals whose debt repayment ability has significantly deteriorated or who have no possibility of recovery."