S.Korean Household Becomes More Indebted to Non-banking Firms

South Korean low-income households with poor credit ratings are increasing their lending from the non- banking sector such as credit card, leasing companies and savings banks, the Korea Times reported Thursday.

As of the end of June, households' total debt owed to the non- banking firms gained 15 percent from a year earlier to 238.3 trillion won (248.9 billion U.S. dollars) according to the Bank of Korea (BOK).

The debt growth rate is the highest since 2002 when it increased by 20 percent, the BOK said.

The central bank estimates a 17 million won (14,912 U.S. dollars) debt per household.

Korea times attributed the growing debt burden to the increase of low-income earners who find difficulty in borrowing from commercial banks and thus have no choice but to use debt from secondary financial firms.

Korea Institute of Finance said since non-banks generally apply higher interest rates to loans with more stringent repayment provision, it expects the financial burden of low income households to increase.

The regulator added that it will continue to relax rules governing savings banks so that they can offer better business to low-income households.

 

Source: CRIEnglish