Increase in 20s and 60s Hae-sal-loan Loans... "Fundamental Measures Needed"

Loan Supply Amount and Number of Cases Both Surge Over 5 Years

The amount of loans supplied through the Saessal Loan program, which is used by low-income groups, and the amount of subrogation (repayment of debt on behalf of the debtor and acquiring the claim) have increased significantly among those aged 20 and under and those aged 60 and over. The Saessal Loan, operated by the Korea Inclusive Finance Agency, is available only to individuals with a personal credit rating in the bottom 20% and an annual income of 45 million KRW or less, or those with an annual income of 35 million KRW or less, and allows borrowing up to 30 million KRW.

According to the data on the ‘Saessal Loan supply status over the past five years’ submitted by the Korea Inclusive Finance Agency to Kim Nam-geun, a member of the National Assembly’s Political Affairs Committee from the Democratic Party of Korea, the supply amount of Saessal Loan 15(17) increased by 243.7%, from 380.7 billion KRW (52,682 cases) in 2019 to 1.3086 trillion KRW (138,621 cases) last year. The Worker Saessal Loan increased by 13.4% during the same period, from 3.0272 trillion KRW (292,672 cases) to 3.4342 trillion KRW (346,038 cases) last year. In the case of Saessal Loan Youth, it also rose by 35%, from 223.4 billion KRW (57,868 cases) in 2020 to 301.6 billion KRW (106,533 cases) last year.

Looking at the supply amount by age group, the Saessal Loan supply amount for those aged 20 and under and those aged 60 and over increased significantly. Loans for those aged 20 and under, which amounted to 841.7 billion KRW in 2019, increased 1.63 times to 1.3749 trillion KRW last year. During the same period, the loan supply amount for those aged 60 and over was 188.1 billion KRW in 2019 but increased 1.91 times to 360.3 billion KRW last year, marking the largest increase among age groups.

As the supply of Saessal Loans increased, the subrogation rate also rose sharply. According to the ‘Saessal Loan subrogation rate over the past five years,’ subrogation for Saessal Loan 15(17), which was only 5.5% in 2020, exceeded 21.3% last year and rose more than fourfold to 24.6% in the first half of this year. For the Worker Saessal Loan, it increased from 10.2% in 2019 to 12.7% in the first half of this year. In the case of Saessal Loan Youth, it surged from 0.2% in 2020 to 11.3%.

Similar to the loan supply amount, the increase in subrogation occurrence was also significant among those in their 20s and those aged 60 and over. For those aged 20 and under, it increased about 4.44 times from 104.2 billion KRW in 2019 to 462.8 billion KRW last year, and for those aged 60 and over, it rose 5.18 times from 15.8 billion KRW to 81.8 billion KRW.

Assemblyman Kim Nam-geun said, “The increase in Saessal Loan loans and subrogation occurrences among those aged 20 and under who have not yet settled and those aged 60 and over who have already retired is an uncomfortable outcome of an unstable national welfare system.” He pointed out, “The increase in small loans for economically struggling citizens only leads to increased debt, accelerating poverty, and from a long-term perspective, it is difficult to see this as a sustainable policy.”

He added, “While temporary fiscal support policies such as expanding Saessal Loans are important, the government and financial authorities should prioritize fundamental measures that enable these individuals to achieve economic independence without relying on debt, such as building a robust social safety net and actively adjusting debts.”