Gen MZ financial relief programs stir up fairness debate

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Thu, December 1, 2022 | 18:46

Economy

Gen MZ financial relief programs stir up fairness debate

Posted : 2022-08-03 16:29

Updated : 2022-08-04 16:02

President Yoon Suk-yeol looks at a book he received as a present during a meeting with civil servants in their 20s and 30s at Government Complex Sejong, May 26. Korea Times file

By Yi Whan-woo

Financial relief programs for those in their 20s and 30s who struggle with loan repayments have stirred up debates about equity and fairness among older people, who also have trouble paying off loans but are excluded from receiving the financial benefits due to their age.

The programs are run by the government and private banks, in line with President Yoon Suk-yeol's push to support members of Generation MZ ― a Korean term referring to Millennials and Generation Z ― who borrowed money mostly to buy homes or to invest in assets such as stocks and cryptocurrencies.

Many of the targeted borrowers are facing snowballing debt, as repayment amounts have been increasing due to hikes in the benchmark interest rate, while they fail to reap profits over falling housing, stock and cryptocurrency prices.

Some 56.7 percent of Generation MZ have relied on bank loans to buy homes, compared to 36.4 percent of older generations.

According to data compiled by 10 major brokerage houses, those in their 20 and 30s accounted for 55 percent of cryptocurrency investors.

"But it does not mean the financial difficulties faced by the older generations are less serious than those of Generation MZ," a market analyst said.

Those in their 40s and 50s had the highest debt among all age groups, according to data compiled by the Korea Institute of Finance (KIF). Their average debt amounted to 143 million won ($109,000), compared to 114 million won for those in their 30s or younger.

According to Seoul Bankruptcy Court, the people who filed for bankruptcy are in older age groups overall, with 6.8 percent of them in their 20s and 30s, 33 percent in their 50s and 44 percent aged 60 or older.

Data from the Financial Supervisory Service (FSS) showed that those in their 40s and 50s accounted for 54.3 percent of the nation's total household debt, which amounted to 1,014 trillion won as of March.

"Financial instability of those in their 40 and 50s should not be overlooked because it can be a risk for the entire national economy," said Rep. Jin Sun-mee of the main opposition Democratic Party of Korea (DPK), who received and released the FSS data. "Unfortunately, they are not on the list of the eligible beneficiaries for financial relief programs."

The government-led programs include reducing loan interest rates by between 30 percent and 50 percent for those aged 34 or younger who suffered losses from stock or crypto coin investments.

In the private sector, Woori Bank allows customers aged between 19 and 29 who have shut down their businesses within the last five years to make repayments for up to five years, if the repayment amount does not exceed 300 million won and their credit rating is decent.

Shinhan Bank has set aside 14 trillion won to help young customers for the next five years, with 11 trillion won earmarked for stabilizing their livelihoods.

"I understand that the younger generations struggle with debt, but the older generations have similar problems, too," a 50-something man surnamed Park said. "In particular, helping the young investors just because they lost money from cryptocurrency assets is not convincing considering that investing assumes risk all the time."

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