Small Business Owners Unable to Repay Debt Surge... Regional Credit Guarantee Foundation's Subrogation Exceeds 1 Trillion Won

1.0291 Trillion Won in Subrogation from January to May This Year... 74% Increase Compared to Same Period Last Year

Assemblyman Yang Bu-nam: "Measures Needed to Boost Consumption and Extend Debt Repayment Period"

This year, the amount of bank debt that small business owners could not repay and was paid off by regional credit guarantee foundations has surpassed 1 trillion won.

Although loans increased during COVID-19, the number of small business owners unable to repay their debts has significantly increased over time due to the complex economic crisis, leading to a rise in business closures.

According to data submitted by the Korea Credit Guarantee Fund to Yang Bu-nam, a member of the National Assembly's Public Administration and Security Committee from the Democratic Party of Korea, the amount of regional credit guarantee fund subrogation payments from January to May reached 1.0291 trillion won, a 74.1% surge compared to the same period last year.

Subrogation payment refers to the regional credit guarantee foundation repaying loans on behalf of small business owners, whom they had guaranteed to banks for loans.

The subrogation payment amount slightly increased from 430.3 billion won in 2021 to 507.6 billion won in 2022, then surged to 1.7126 trillion won last year.

Although the subrogation payment amount jumped significantly last year, it has continued to increase by over 70% this year as well.

By region, this year's subrogation payments are highest in Gyeonggi Province at 230.7 billion won, followed by Seoul (195.8 billion won), Busan (84.1 billion won), Gyeongnam (78.2 billion won), Incheon (62.0 billion won), Gyeongbuk (59.9 billion won), and Daegu (54.5 billion won).

The substantial increase in subrogation payments indicates that the business conditions of small business owners are not good.

Small business owners increased their loans during COVID-19, and as repayment periods arrived over time, they have yet to recover the capacity to repay bank debts.

According to Korea Credit Data's "Q1 Small Business Management Index," the average sales of small business owners were 43.17 million won, down 7.7% from the same period last year, and operating profit was 9.15 million won, a 23.2% decrease.

Additionally, fierce price competition due to e-commerce platforms such as Coupang and AliExpress has exacerbated difficulties for small business owners.

As a result, the number of small business owners forced into closure due to critical conditions is increasing.

From January to May, the Yellow Umbrella mutual aid payments made to small business owners due to "business closure" amounted to 657.7 billion won, an 18.3% increase compared to the same period last year.

The Yellow Umbrella is a mutual aid system designed to stabilize the lives and provide retirement security for small enterprises and small business owners. It functions as a retirement fund for small business owners, who tend to avoid breaking it if possible.

Yellow Umbrella closure mutual aid payments increased from 730 billion won in 2020 to 900 billion won in 2021, 970 billion won in 2022, and surpassed 1 trillion won for the first time last year (1.26 trillion won), continuing to rise this year.

Yang Bu-nam stated, "With high inflation, high interest rates, and continued sluggish domestic demand, the risk of a chain failure among small business owners and self-employed individuals is increasing," adding, "It is necessary to move away from conventional support methods and implement proactive and bold measures such as stimulating consumption and extending debt repayment periods for small business owners and the self-employed."