By Choi Sung-jin
The amount of cash borrowed from private moneylenders has increased more than 50 percent over the past three years.
According to data the Financial Supervisory Board submitted to Rep. Park Chan-dae, outstanding loans by private moneylenders totaled 13.26 trillion won ($11.94 billion) last year, an increase of 4.56 trillion won, or 52 percent, from 8.7 trillion won in 2012.
By purpose, the largest share of these loans was for subsistence, data from the Consumer Loan Finance Association (CLFA), a group of private moneylenders, showed.
According to the CLFA, loans for subsistence accounted for 62 percent of total borrowing from non-institutional lenders this year, up 7 percentage points from the 55 percent in 2012. The portion of borrowers in their 20s and 30s fell while that of workers in their 40s and 50s rose. And the lower the income and larger the family, the higher the possibility of using private lenders, the data showed.
The legal maximum interest rate for these private lenders is 27.9 percent a year, 10 times that of household loans extended by banks. The number of newly registered private moneylenders surged a hefty 44 times, from 75 in 2012 to 3,285, in the first nine months of this year. The total number of private lenders and loan brokers, however, dropped from 10,895 in 2012 to 8,752 last year.
By region, Seoul has the largest number of private lenders with 3,765, 40 percent of the total, followed by Gyeonggi Province, Busan, Incheon, Daejeon and Daegu.
The number of unregistered moneylenders is showing little sign of declining, however, as seen by the sharp increase in the number reported, from 1,220 last year to an estimated 2,008 this year.
"If the financial authorities fail to grasp the exact amount of loans extended by these private moneylenders, particularly unregistered ones, their statistics in household debts cannot be trusted," Rep. Park said. "The government should provide more incentives to ferret out unregistered lenders while strengthening micro-financing for the working poor with low credit standing."
The amount of cash borrowed from private moneylenders has increased more than 50 percent over the past three years.
According to data the Financial Supervisory Board submitted to Rep. Park Chan-dae, outstanding loans by private moneylenders totaled 13.26 trillion won ($11.94 billion) last year, an increase of 4.56 trillion won, or 52 percent, from 8.7 trillion won in 2012.
By purpose, the largest share of these loans was for subsistence, data from the Consumer Loan Finance Association (CLFA), a group of private moneylenders, showed.
According to the CLFA, loans for subsistence accounted for 62 percent of total borrowing from non-institutional lenders this year, up 7 percentage points from the 55 percent in 2012. The portion of borrowers in their 20s and 30s fell while that of workers in their 40s and 50s rose. And the lower the income and larger the family, the higher the possibility of using private lenders, the data showed.
The legal maximum interest rate for these private lenders is 27.9 percent a year, 10 times that of household loans extended by banks. The number of newly registered private moneylenders surged a hefty 44 times, from 75 in 2012 to 3,285, in the first nine months of this year. The total number of private lenders and loan brokers, however, dropped from 10,895 in 2012 to 8,752 last year.
By region, Seoul has the largest number of private lenders with 3,765, 40 percent of the total, followed by Gyeonggi Province, Busan, Incheon, Daejeon and Daegu.
The number of unregistered moneylenders is showing little sign of declining, however, as seen by the sharp increase in the number reported, from 1,220 last year to an estimated 2,008 this year.
"If the financial authorities fail to grasp the exact amount of loans extended by these private moneylenders, particularly unregistered ones, their statistics in household debts cannot be trusted," Rep. Park said. "The government should provide more incentives to ferret out unregistered lenders while strengthening micro-financing for the working poor with low credit standing."
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