Lee Chan-jin Says Low-Credit Borrowers Should Be Handled by Banks... Orders Expansion of Saehuimangholssi Loan

Lee Chan-jin, Governor of the Financial Supervisory Service (FSS), has repeatedly told senior FSS officials recently that "low-credit borrowers should be handled by banks, while mid-credit borrowers should be handled by savings banks and other second-tier financial institutions," according to sources. In response, the FSS called in representatives from commercial banks to examine ways to expand the Saehuimangholssi Loan, a policy lending product for low- and mid-credit borrowers, to more low-credit customers.
After President Lee Jae-myung again criticized what he called "cruel finance," saying that "low- and mid-credit borrowers are unable to get bank loans and are pushed into second-tier lenders and private loan sharks, where they suffer under high interest rates," the FSS appears to be seeking a comprehensive solution on its own, separate from the Financial Services Commission (FSC)'s move to form an Inclusive Finance Task Force.
According to Financial News on the 10th, the FSS met with five commercial banks on the 30th of last month and asked whether it would be possible to supply about 70% of the Saehuimangholssi Loan to the bottom 20% of the credit spectrum. This year's target for bank-sector supply of the loan, set by the financial authorities, totals 5.1 trillion won.
A banking industry official said, "If you are in the bottom 20% of credit scores, you are likely to be a multi-debt delinquent customer already in arrears at a bank." The official added, "We barely met the authorities' target by expanding it to mid-credit borrowers, and it is difficult even to identify eligible customers in the bottom 20%, so reaching 70% would be hard." The Saehuimangholssi Loan is an unsecured lending product, so banks bear the risk directly, unlike the Sunshine Loan, which is backed by guarantees.
The FSS did not present specific figures, but it discussed detailed ways to expand the Saehuimangholssi Loan toward low-credit borrowers, along with possible incentives for banks, according to the report.
Multiple financial authority officials said, "It is difficult for second-tier financial institutions to absorb low-credit borrowers given their size." They added, "We interpret this as meaning that smaller financial firms should take on mid-credit borrowers through private mid-rate lending, while banks with more capacity should take on low-credit borrowers."
Because Lee understands the president's governing philosophy better than anyone, the FSS is seen as actively looking for ways to expand banks' inclusive finance role. Banks, however, say the FSS's approach of seeking alternatives within existing inclusive finance policies is better than overhauling the entire credit evaluation and lending systems. Another banking industry official said, "If the product features of the Saehuimangholssi Loan are improved somewhat, it may be difficult, but we could still find a workable plan."



zoom@fnnews.com Lee Jumi Park Sohyun Reporter