Self-Employed Loans Reach Record 1,120 Trillion Won
More Than Half of All Borrowers Are Multiple Debtors
High interest rates and sluggish consumption have led to a more than 40% increase in self-employed individuals unable to repay their debts over the past year.
According to the credit rating agency NICE Information Service's "Status of Loans to Individual Business Owners," as of the third quarter of last year, the loan amount from financial institutions to 3,369,000 individual business owners reached 1,123 trillion won.
This is the first time and the highest record ever that the loan amount to self-employed individuals exceeded 1,120 trillion won during the same period.
In particular, the number of borrowers at risk of default (defined as overdue for more than three months) reached 146,000. Compared to the third quarter of 2023 (103,000), this represents a sharp increase of 41.8% over one year. The loan amount held by these risky borrowers also increased by 37.5%, from 21.6 trillion won to 29.7 trillion won during the same period.
The number of self-employed individuals who have borrowed the maximum amount from three or more financial institutions, making additional loans or rollover practically impossible, is also rapidly increasing. These multiple debtors number 1.72 million, accounting for more than half of all individual business loan borrowers.
Their outstanding loan balance (689.6 trillion won) accounts for 61.4% of the total outstanding loans of self-employed individuals (1,123.8 trillion won).
Among multiple debtors, 97,000 are overdue borrowers, and their total loans amount to 23.5 trillion won, increasing by 29.3% and 29.8%, respectively, compared to one year ago.
According to data on the "Status of Multiple Debtors among the Self-Employed" submitted by the Bank of Korea to Representative Yang Bu-nam (Democratic Party) of the National Assembly's Public Administration and Security Committee, the delinquency rate of multiple debtors among the self-employed was estimated at 2.03% as of the end of the third quarter last year. This is the highest level in 10 years and 6 months since the end of the first quarter of 2014 (2.16%).
Multiple debtors are defined as borrowers whose total number of household loan institutions and individual business loan products is three or more, with delinquency defined as overdue principal and interest for one month or more (except for mutual finance and savings banks, where it is defined as overdue principal for one day or more or overdue interest for one month or more).
In response, Lee Chang-yong, Governor of the Bank of Korea, said that an additional supplementary budget is necessary and stated, "I believe it is desirable for the supplementary budget to target and support those self-employed individuals who are genuinely struggling."
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