Savings banks turn to migrant workers to expand loan service
Migrant workers harvest onions at a farm in Changnyeong County, South Gyeongsang Province, May 29. Yonhap
Savings banks are focusing on lending money to manual laborers from abroad in an effort to expand their customer base, driven by the sharp increase in the number of foreign nationals in Korea.
According to the Ministry of Justice, Monday, Korea was home to 2.61 million foreign nationals, an increase from 2.51 million just six months earlier.
The number also jumped 34 percent from the end of 2021.
This increase in the number of foreign residents comes as savings banks find it increasingly necessary to attract new customers due to a decline in outstanding loan balances.
The amount of outstanding loan balances fell to 99.95 trillion won ($72.88 billion) as of May, down from 115.28 trillion won in 2022 and 104.93 trillion won in 2023.
“The fall in the outstanding balance of loans does not suggest that the clients, who are almost 100 percent Korean nationals, are better off in their living and therefore do not urgently need to borrow money from us,” a savings bank spokesperson said on condition of anonymity.
The spokesperson noted that savings banks are second-tier commercial lenders primarily serving customers with credit ratings too low to secure loans from larger, first-tier banks.
“In fact, such a fall suggests more Korean nationals are in worse financial condition and are not eligible to borrow money from us,” he added.
Foreign manual laborers with E-9 visas have garnered attention from the domestic banking industry because there is limited data available regarding their credit ratings.
Given the circumstances, savings banks are expected to leverage their years of experience handling customers with relatively low credit ratings to attract these guest workers.
Industry sources estimate that the loan market for foreign manual laborers is currently valued at 500 billion won.
Since introducing a loan service exclusively for E-9 visa holders from nine countries, including Cambodia, Myanmar, and Vietnam, in April, Welcome Savings Bank has issued over 10 billion won in loans.
The loan amount is the largest among all savings banks. Moreover, the rate of customers missing repayments is just 0.2 percent.
“We view our initial foray into financial services for international laborers as successful and plan to build on this progress over the long term,” a Welcome Savings Bank spokesperson said.
OK Savings Bank also launched its own loan service for E-9 visa holders in April. Additionally, KB Savings Bank introduced a service for both E-9 and E-7 visa holders.
An E-7 visa is granted to foreign workers who have acquired advanced skills and are eligible to stay in Korea long-term after working for more than five years on an E-9 visa.