$1.7 Bil. in Microcredit Planned for the Poor
By Kim Tae-gyu
Staff Reporter
Starting this December, people with low-credit ratings will be able to borrow money from microcredit banks, which will be run on funds contributed by conglomerates and financial firms.
An economic meeting, chaired Thursday by President Lee Myung-bak, decided to lend 2 trillion won ($1.7 billion) during the next 10 years to those who cannot borrow money from banks due to their low ratings.
"Since 2000, a mere 148 billion won has been extended to people under microcredit programs. In 2008, the size amounts to just 0.005 percent of the national output," Financial Services Commission Chairman Chin Dong-soo told a press conference.
"We plan to increase the volume by 13 times to 2 trillion won over the next decade in order to help low-income and low-credit-rate bracket people stand on their own feet," he said.
People who have credit ratings of seven to 10, the worst rating on the scale, will be eligible for the loans when they try to start a new business or need emergency aid for an existing one.
Credit ratings of seven and eight are given to those who have defaulted in reimbursing debts higher than 500,000 won. If they are at least three months in arrears on their debt payments, the ratings would fall to nine or 10.
However, successful candidates for the loans would have to be clear of any defaulted debt at the time of application and should not be on the government's welfare program.
The maximum amount extended to individuals is expected to reach tens of millions of won and the repayment would mostly be made over four years with a one-year grace period.
"By the end of next May, we plan to set up 20 to 30 microcredit banks and eventually aim to increase the number to somewhere between 200 and 300 across the nation," Chin said.
"We hope to extend the loans at interest rates lower than the market that now stand at around 5 percent. By reducing operational costs of each branch, the low interest rates would be viable," he said.
Out of the 2 trillion won of the microcredit funds, local conglomerates will donate half as promised by the Federation of Korean Industries, the lobby group for chaebol.
Around 700 billion won would come from inactive accounts in which there have not been any transactions or inquiries for longer than five years. The remaining 300 billion won will be contributed by banks or securities institutions.
For more information, people can call 1600-5500. Only Korean-language services are available.