North Korean defectors struggle with finance, high-interest loans
Citizens get loan counseling at a local bank in Seoul in this file photo. North Korean defectors showed a higher rate of getting high-interest-rate loans in secondary financing than native South Koreans with similar credit ratings and income, according to an economic report on North Korean defectors' credit conditions. / Newsis
By Jung Da-min
North Korean defectors showed a higher rate of getting high-interest-rate loans in secondary financing than native South Koreans with similar credit ratings and income, according to an economic research report on North Korean defectors' credit conditions.
According to the April report conducted by Jung Seung-ho of the Bank of Korea's North Korean economy research department, 15.1 percent of defectors took out high-interest loans, about four times higher than the control group of native South Koreans (3.8 percent).
The report cited financial illiteracy as the main reason, noting that defectors in the first- to third-grade credit groups also showed a high proportion of taking out high-interest loans in secondary financing.
In particular, male defectors who served long-term mandatory military service in North Korea had a significantly higher number of delinquencies.
“The lack of financial knowledge stemming from prolonged residence in a socialist society has a negative impact on defectors' financial adaptation in South Korea,” the report reads.
“Therefore, in order to increase the degree of financial inclusion for North Korean defectors, additional support, such as financial education, should be considered.”
Kim Young-hui, a defector and a researcher at Korea Development Bank (KDB), also agreed many defectors experience financial difficulties due to lack of knowledge.
“In North Korea, the central bank functions as a commercial bank while it does not have any personal deposit services yet,” said Kim, who majored in accounting in North Korea before coming to the South in 2002.
She said North Koreans do not really care about banking systems because they do not believe in them, especially after the Arduous March in the mid-1990s.
“There is no reason for them to use banking services, because they hardly get their money back. They rather keep their money with them, or deposit it with individual traders.”
According to a 2012 survey cited in the report, only 3.8 percent of the defectors responded that they had experience with trading services at banks before coming to South Korea.
The report called for follow-up measures by the government, saying financial education specialized for each defector is needed to help them make rational decisions in their financial lives.
Financial adaption has been one of the main issues for defectors succeeding in South Korea, while some go back to the North or commit suicide because of economic hardship.