Few Gain from Microcredit Due to Tough Rules
By Kim Jae-won
Staff Reporter
Local banks and businesses launched microcredit businesses a month ago, but few applicants benefitted due to heavy-handed rules and requirements, analysts said Thursday.
According to the Financial Services Commission (FSC) and Smile Microcredit Bank, 5,872 people applied for small loans at 19 branches of the lender nationwide from Dec. 15 to Tuesday. Smile Microcredit Bank is an entity that sets rules on microcredit financing and manages business practices of microcredit lenders run by commercial banks and large companies.
One-third of total applicants, or 1,938 people, met the first credit requirement. Out of them, the lender extended loans worth 98 million won to only 20 applicants based on their business plans and location. Others are waiting for the results as the evaluation takes about a month.
Some analysts said that without modifying such rules, the government-initiated microcredit financing will do little to help those in the low-income bracket.
``Many people have asked us to relax tough regulations, such as the two-year requirement of running a shop and having more than 50 percent of the proposed loan,'' said Jung Min-young, a director of the Euljiro branch of Woori Smile Microcredit Bank.
Woori has provided loans to eight applicants so far, 5 million won per person since the branch began its business on Dec. 17, 2009.
Ji Il-yeol is one of the lucky beneficiaries. The 47-year-old is running an unregistered shop for bedding products in Goyang, Gyeonggi Province, and applied for 5 million won to buy fabric. Woori decided to lend to him.
``Ji was so glad to hear that he could get the money. Five million won sounds like a small amount, but for the needy it is a huge amount,'' Jung said.
``I hope others can also benefit from regulation reforms.''
Smile Microcredit Bank plans to overhaul related rules sooner rather than later.
``I know that there are many complaints about the regulations. We will consider changing standards for the loans at the end of next month,'' Kim Seung-yu, chairman of the bank, told reporters recently.