Shinhan Bank to Launch "Virtuous Cycle Inclusive Finance Program" Starting in January

Building a Virtuous Cycle in Finance by Using Part of Interest Payments for Principal Repayment
Structurally Easing Financial Burdens Through Tangible Support

Shinhan Bank announced on December 29 that it will launch the “Virtuous Cycle Inclusive Finance Program” at the end of January to provide substantial financial relief for small business owners and financially vulnerable groups struggling with prolonged high interest rates.

This program is the first policy initiative from the Inclusive Finance Division of the newly established Group Productive Finance Promotion Task Force. Its core structure goes beyond simple interest rate reductions or one-off support by using a portion of the interest paid by customers to repay the loan principal, thereby reducing the overall debt balance.

The “Virtuous Cycle Inclusive Finance Program” operates by automatically repaying a portion of the loan principal using a set amount from the interest paid by customers. As a result, the outstanding loan balance decreases, which in turn reduces future interest burdens, creating a virtuous cycle effect.

For business loans, the program targets customers with low credit scores who hold Korean won-denominated loans with interest rates exceeding 5% per annum. If a loan is extended, the program is automatically applied without a separate application. For loans with interest rates above 5%, the portion of interest exceeding this threshold (up to a maximum of 4 percentage points) will be used to repay the principal. However, certain sectors such as real estate leasing and supply, as well as customers with a history of overdue payments, are excluded from eligibility.

For household loans, the program targets low-credit customers using high-interest unsecured loans. Existing loans can be converted into long-term loans with a fixed annual interest rate of 6.9%, which not only lowers the interest rate but also reduces the burden of principal repayment. Customers who are currently overdue are excluded from this program.

This program is designed to directly reduce the interest burden for high-interest, low-credit customers while also lowering their overall debt, thereby laying a foundation for long-term credit recovery and a fresh start. Shinhan Bank plans to structurally ease financial burdens through support measures that customers can tangibly feel.

A Shinhan Bank representative stated, “We have established this policy to fulfill our social responsibility through our core financial business, such as connecting the interest paid by low-credit customers to principal repayment. Going forward, we will continue to build a sustainable inclusive finance support system that connects self-employed individuals, small and medium-sized enterprises, and local communities through platforms such as ‘Ddanggyeyo’ and ‘Hey Young’.”

Meanwhile, since December 3, Shinhan Bank has been implementing the “Productive Finance Growth Support Package” targeting ultra-innovative economy, national core industries, and the manufacturing sector, simultaneously supporting corporate investment funds and alleviating high interest burdens.

This package consists of: ▲ a new loan interest rate support program for companies engaged in industries related to the 15 ultra-innovative economy projects and national core industries, and ▲ a program to ease the interest burden (with automatic principal repayment) for high-interest loans held by small and medium-sized enterprises and individual business owners.

For companies operating in industries related to the 15 ultra-innovative economy projects and national core industries, Shinhan Bank provides interest rate support of up to 100 basis points (1 percentage point) for new loans ranging from 100 million to 30 billion won, subject to separate review and eligibility criteria. This aims to stably supply investment funds to companies with technological capabilities and growth potential, thereby strengthening industrial competitiveness.

Additionally, if small and medium-sized enterprises or individual business owners extend their existing loans within 12 months and the interest rate exceeds 7% per annum, the portion of interest exceeding this threshold (up to a maximum of 3 percentage points) will be used for automatic principal repayment. This program is also applied automatically without a separate application, and is available to those with a certain credit rating and no recent overdue history, excluding certain sectors such as real estate leasing and supply. The package is expected to provide interest rate support worth approximately 52 billion won for a total of 6.9 trillion won in loans.