Supplying Unsecured Loans at 12% Interest Rates
to Mid- and Low-Credit Borrowers
The Korea Federation of Savings Banks announced on July 22 that, just two months after launching an innovative financial service jointly developed by savings banks and online investment-linked finance companies, they have supplied 10 billion KRW in unsecured loans to mid- and low-credit borrowers.
The purpose of the savings banks' investment linkage with online investment-linked finance companies is to expand the supply of mid-interest rate unsecured loans to mid- and low-credit borrowers. This service was designated as an innovative financial service by the Financial Services Commission in July of last year.
Under this system, the online investment-linked finance company recruits and screens individual unsecured loan applicants, then requests the associated savings bank to decide whether to invest. The savings bank then provides funding through its internal decision-making process.
The service mainly provides unsecured loans at an average mid-interest rate of around 12% to individuals in the bottom 50% of personal credit scores.
Given that the linked investment service is still in its early stages, both the savings banks and the online investment-linked finance industry view the achievement of 10 billion KRW in loan issuance as a significant milestone.
Oh Hwagyeong, Chairman of the Korea Federation of Savings Banks, said, "As more savings banks are preparing to participate in linked investments with online investment-linked finance companies, I hope this service will establish itself as a key channel for inclusive finance. The Federation will also continue to provide strong interest and support."
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