Low-Interest Loan Support for Socially Disadvantaged Youth
On June 8, the Financial Services Commission announced that when socially disadvantaged youth apply for the Sunshine Loan Youth program, the government will provide an interest subsidy of 1.6 percentage points per year, allowing them to receive ultra-low interest loans at an annual rate of 2%.
The socially disadvantaged group includes recipients of basic livelihood security, those in the second-lowest income bracket, self-support workers, recipients of the Earned Income Tax Credit, registered persons with disabilities, single-parent and grandparent-headed families, multicultural families, and North Korean defectors.
On October 2 of last year, the Financial Services Commission, together with relevant ministries, announced the "Plan to Expand Customized Financial Support for Low-Income and Vulnerable Groups" to alleviate the difficulties faced by vulnerable groups and to support their fundamental recovery. Subsequently, the Enforcement Decree of the Microfinance Act was revised this year to provide a legal basis for the Korea Inclusive Finance Agency (KIFA) to implement interest subsidy programs for low-income individuals and the general public. Interest subsidy refers to a system in which KIFA pays financial institutions the amount equivalent to the interest rate reduction on policy-based microfinance products, thereby reducing the interest burden for low-income individuals and the general public.
The Financial Services Commission and KIFA, after discussing the necessary administrative procedures for implementing the interest subsidy for socially disadvantaged youth, plan to launch the interest subsidy program for this group starting June 9. The interest support will apply to new guaranteed loans applied for from June 9 onward. With the implementation of this program, socially disadvantaged youth will be able to access Sunshine Loan Youth loans at an ultra-low interest rate of 2% per year, which is 1.6 percentage points lower than the standard annual rate of 3.6%.
Sunshine Loan Youth is a policy-based financial product that provides loans to university (including graduate) students, unemployed youth, young adults in their first year of employment at small and medium-sized enterprises, and individual business owners within one year of starting their business, provided they are aged 34 or younger and have an annual income of 35 million won or less.
In addition, on February 28, the government announced plans to expand both the supply scale and supply channels of the Sunshine Loan Youth program as part of measures to strengthen microfinance support. Accordingly, last month, through a supplementary budget, the Financial Services Commission secured an additional 15 billion won (from the lottery fund) for the guarantee fund of the Sunshine Loan Youth program and increased the supply scale from the previous 200 billion won to 300 billion won, with the aim of alleviating financial difficulties for low-income university students and youth.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
