Discriminated in Policy Loans Despite Mandate for Inclusive Finance [Mutual Finance Blocked by Regulations] ③

Saemaul Geumgo and Credit Unions Have Nationwide Branch Networks
Policy Loan Performance Lower Than Regional or Internet Banks
Fewer Policy Products Lead to Performance Gap
Mortgage Loan Regulations Are Also Stricter

Mutual financial institutions are expected to play the role of financial institutions for ordinary citizens, but in reality, their performance in handling financial products for low-income and policy-based customers lags behind that of banks. There are also many cases where they face discrimination in various lending regulations simply because they are mutual financial institutions.

According to the financial sector on September 12, the amount of new policy fund loans handled by Saemaul Geumgo in the first half of this year was 20.03 billion won. Specifically, 4.53 billion won was for Sunshine Loans, 13.22 billion won was for loans under agreements with local governments, and 2.28 billion won was for policy fund loans for small business owners. The average annual amount from 2019 to last year was 29.74 billion won. By category, the average for Sunshine Loans was 16.45 billion won, local government agreement loans 11.12 billion won, and small business owners 2.17 billion won.

For credit unions, the performance of policy fund loans excluding local government agreement loans was 11.53 billion won in 2022, 12.96 billion won in 2023, and 6.81 billion won last year. The three-year average was 10.43 billion won, which is not significantly different from Saemaul Geumgo (15.84 billion won excluding local government agreement loans).

Policy Loan Performance Lower Than Local or Internet Banks...Due to Fewer Products Offered

However, despite having a nationwide branch network, mutual financial institutions actually have lower policy loan performance than local banks or internet banks. According to the Korea Federation of Banks, among local banks (excluding Jeju Bank), the bank with the smallest amount of socially responsible financing last year was Kyongnam Bank with 16.48 billion won. The most recently launched internet bank, Toss Bank, recorded 50.62 billion won, which is comparable to Hana Bank (55.32 billion won) and Kookmin Bank (59.32 billion won).

This gap is due to mutual financial institutions being able to handle fewer policy loan products than commercial banks. Mutual financial institutions are limited to Sunshine Loans guaranteed by the Korea Inclusive Finance Agency, policy loans backed by guarantees from the Small Enterprise and Market Service, and agreement loans created through contracts with local governments. Occupational cooperatives such as Nonghyup, Suhyup, and the National Forestry Cooperative Federation can additionally handle occupational policy loans, such as agricultural and livestock management funds (Nonghyup) and funds for fostering next-generation agricultural managers (Nonghyup).

In contrast, banks operate a wider variety of policy loans beyond those handled by mutual financial institutions. For example, among Sunshine Loans, the "Sunshine Loan Youth" is a financial product provided to college students and young people. Last year, its performance reached 18.56 billion won, which is larger than the total policy loan volume of mutual financial institutions. In addition, banks offer products such as Saehopeulssi, Sunshine Loan Bank, and Sunshine Loan 15.

There are also clear differences in policy products related to mortgage loans. The Didimdol Loan, a home purchase loan funded by the Housing and Urban Fund, is only available at some commercial or local banks. The same applies to the representative policy jeonse loan product, the Bogeumjari Loan. In the case of mutual financial institutions, there are a few products created in partnership with SGI Seoul Guarantee (such as the Saitdol Loan, Lease Deposit Guarantee Loan, and NH Kok Jeonse Loan), but the fact that SGI Seoul Guarantee is a private company makes this different.

Lending regulations are also applied differently. Industry insiders say, "If financial institutions for ordinary citizens focus only on unsecured loans to fulfill their roles, their financial soundness could deteriorate, so there is a need to partially ease regulations on mortgage loans."

Due to the June 27 lending regulations, banks are currently not allowed to offer mortgage loans with maturities of 40 or 50 years, but in principle, banks can provide mortgage loans with maturities ranging from 30 to 50 years. However, mutual financial institutions are generally limited to mortgage loans with a 30-year maturity. In the case of Saemaul Geumgo, there are a few cases of 40-year maturity loans (move-in balance loans), but these are extremely limited to buyers of new homes only, and for those who already own a home and want to take out a mortgage loan, the maximum maturity is 30 years. In addition, the debt service ratio (DSR) limit for mutual financial institutions is 50%, which is higher than the 40% limit for banks, making the lending threshold appear lower on the surface. However, since banks offer longer-maturity products, the actual loan limits are often more advantageous at banks.