By Kim Tae-gyu
Staff Reporter
Samsung Group, the nation's top business conglomerate, opened a microcredit bank Tuesday that will lend money to people in the low-income bracket at relatively low interest rates.
The group launched the bank in Suwon, Gyeonggi Province, where its affiliates, such as Samsung Electronics are headquartered. It will handle 300 billion won in funds over the next 10 years financed by subsidiaries of the group.
``We plan to establish around five branches next month across the country and the number could increase down the road, if necessary,'' a Samsung Group spokesman said.
``We will start accepting applications for loans beginning Wednesday. The one-off loans amount to somewhere between 5 million and 50 million won and have an annual interest rate of about 4.5 percent.''
The repayment schedules will differ depending on the income, credit rating and the requested loan amounts of applicants. Typically, those who borrow from the bank will be expected to pay back the loans in installments over a few years after a grace period of six months or a year.
Those who have credit ratings of seven to 10 ― the worst rating on the scale ― will also be eligible for the loans but successful applicants must be clear of any defaulted debts and should not be recipients of government welfare.
``We hope the microcredit programs will help people in marginalized income brackets so that they can lead stable lives,'' Samsung Life Insurance Chairman Lee Soo-bin said at the opening ceremony.
The microcredit bank scheme has been spearheaded by the Seoul administration, particularly the Financial Services Commission (FSC), in the aftermath of the worldwide economic turmoil.
The income gap between the haves and have-nots here has widened after the financial crisis, prompting some people to resort to loan sharks that levy exorbitant annual interest rates.
On top of Samsung, other major chaebol, such as Hyundai Automotive and LG groups as well as commercial lenders such as Kookmin Bank, are looking to follow suit and set up loan opportunities for those in need.
The FSC aims to encourage local conglomerates and lenders to establish a total of more than 20 branches by next May with the eventual goal of increasing the tally to hundreds in the near future.
The overall amount of the fund is expected to reach 2 trillion won over the next 10 years and approximately 200,000 people who would otherwise struggle to obtain loans from banks due to low credit ratings are likely to benefit.
``Although the economy is showing signs of recovery, many people are still suffering as they are unable to get financing from banks. Hence, they tend to depend on private financing despite high interest rates,'' FSC Chairman Chin Dong-soo said.
``In this climate, it would be meaningful for microcredit banks to lend money to people at low borrowing costs,'' he said.