Value context and insight. lkm@koreatimes.co.kr
Regional banks bolster support for low-credit foreign workers
Foreign workers harvest potatoes in Gangneung, Gangwon Province, Wednesday. Yonhap
By Lee Kyung-min
Regional banks are rushing to roll out low-interest loans for foreign workers, a much-needed product for non-Korean borrowers with little credit history here, market watchers said Thursday.
The so-called “thin filers” are those who find it difficult to use financial services in Korea, despite their contribution to the economy in remote non-Seoul regions grappling with severe labor shortages.
Many find the borrowing costs here are low compared to their home countries, where only high-interest products are available.
Jeonbuk Bank offers foreigner-only credit loans. Its interest rate is 13 percent, which one worker from Myanmar said was only 30 to 40 percent of what they had to pay in monthly interest to banks in their home country.
In 2016, the North Jeolla Province-based bank became the first commercial lender in Korea to introduce credit loans for foreigners.
"We saw strong borrowing demand from foreigners staying here on E-9 visas, which are issued for work in manufacturing, construction, agriculture and livestock industries," a JB Financial Group official said. Jeonbuk Bank is its subsidiary.
The lender said the workers’ income histories in Korea can be referenced for credit ratings.
"Many E-9 visa holders take out high-interest loans of around 20 million won ($14,620) from brokers in their home countries at an interest rate between 20 percent and 40 percent. The brokers in their home countries charge high interest, but the workers have few other options when it comes to paying for visa issuance, Korean language training and travel costs," he added.
As of last year, more than 300,000 foreign workers are staying in Korea on E-9 visas.
The monthly interest often causes a debt spiral. The more moderate interest rate of 13 percent from banks here can help serve the financial needs of these workers, helping them avoid risks from high interest.
The lender hired more than 100 foreign nationals to provide service in 16 languages.
It also partnered with online platform operators to provide information on housing, language learning and healthcare services for foreigners, as well as job listings.
The current delinquency rate on these loans to foreign workers is around 2 percent. Most foreign borrowers pay interest on time, as they have families back home to support.
The lender’s foreign credit loans stood at about 470 billion won as of March, accounting for 72 percent of market share total.
BNK Busan Bank is providing tailored financial services for foreign exchange students. Its affiliate BNK Kyongnam Bank is also providing tailored services for foreign workers in Ulsan and Changwon.
"Ulsan and Changwon is where many foreign workers are based, working in manufacturing industries. We strengthened language services to enhance customer service there," a BNK Financial Group offcial said. The group owns BNK Busan and BNK Kyongnam.
Meanwhile, Kwangju Bank is seeking to establish a center dedicated to the needs of foreign workers.