Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Debts held by self-employed people take center stage in election debate
A street is lined with empty shops in Seoul's major shopping district of Myeong-dong, Sunday. Yonhap
By Lee Yeon-woo
Calls for structural reform grow as candidates pledge bipartisan financial support
The self-employed are a vital voting bloc in Korea. In every election, candidates make the rounds at traditional markets and mom-and-pop stores, taking photos with merchants and promising to improve their livelihoods.
This familiar political ritual has taken on new urgency in 2025. With debt accumulated during the COVID-19 pandemic still weighing heavily on the self-employed, their economic struggles have moved to the forefront of the presidential campaign.
"Small businesses are dying. The government cannot continue to stand by and do nothing," Lee Jae-myung, the candidate for the liberal Democratic Party of Korea, said during the first televised presidential debate on Sunday. "Now is the time for the government to take on debt if necessary to revive the economy for ordinary people."
Kim Moon-soo of the People Power Party voiced a similar position, pledging to adopt policies to restructure small business debt and enhance consumer spending. "To ensure the survival of small business owners, an increase in national debt to some extent is unavoidable," he said.
This rare political consensus emerged as business closures and rising loan delinquency rates among the self-employed have reached alarming levels.
Lee Jae-myung, second from left, the presidential candidate for the Democratic Party of Korea, greets merchants at a traditional market in Haman, South Gyeongsang Province, May 10. Yonhap
During the COVID-19 pandemic, the government extended relief loans to small businesses, expecting repayments to resume once social distancing restrictions were lifted and the economy recovered.
However, sluggish demand and high interest rates have thwarted those policy goals.
Delinquency rates at domestic commercial banks hit a 10-year high in the first quarter of 2025, recording an average of 0.51 percent. Meanwhile, applications for the government’s business closure support program recorded 29,269 as of May 9, nearly reaching the annual target of 30,000, amid a steady decline since January in the number of self-employed.
The problem is that their financial vulnerability poses a risk not only to individual household finances, but also to the broader economy, as previously warned by Bank of Korea Gov. Rhee Chang-yong.
The self-employed make up a significant 23.2 percent of the nation's labor force. Korea has one of the highest self-employment rates among OECD member countries — ranking seventh overall — trailing only a few developing economies such as Colombia and Mexico.
Low entry barriers have made self-employment a default path for many retirees and laid-off workers, often regardless of prior business experience.
Small business owners stage a protest in front of the Sejong Center for the Performing Arts in Seoul, May 14, urging the incoming administration to provide support. Yonhap
"It’s often difficult to find another job here after leaving a job. Many people end up starting businesses out of necessity, without adequate preparation," said Noh Min-sun, a research fellow at the Korea SMEs & Startups Institute.
While many self-employed are calling for stronger government support, including debt forgiveness, critics argue that such measures could be seen as unfair to borrowers who have continued to repay their loans despite hardships.
They also caution that large-scale forgiveness could undermine the long-term fiscal sustainability of the government.
Instead, experts emphasize the need for structural reforms to enhance the long-term viability of small businesses, alongside proposed financial support measures to ensure a soft landing.
"We need to reduce the necessity-driven small businesses and encourage strategic, well-prepared entrepreneurship," Noh said.
"Once a business begins to struggle, the government should guide it through an orderly exit, using tools like debt restructuring, rather than letting it linger as a marginal enterprise. After closure, it also must support former owners in transitioning back into the labor market," he added.