As more self-employed people suffer from worsening sales due to the sluggish economy, the number of delinquents who are unable to pay back loan interest is increasing rapidly. As the delinquency rate is already soaring, concerns are growing that it will be a detonator for loan insolvency in the financial sector as a whole. In particular, the delinquency rate of self-employed multiple debtors who received loans from various places easily exceeded 10%, putting the management of self-employed loans on alert.
According to the Bank of Korea on the 27th, the number of delinquent borrowers who have been unable to repay principal and interest for more than a month among self-employed people surged 3.6 times in three years from 41,000 at the end of 2021 to 148,000 at the end of 2024.
In a situation where the number of self-employed people who have taken out loans is decreasing, the number of delinquent borrowers who cannot pay off their loans is increasing. In fact, the number of self-employed people who borrowed money from the financial sector was 3,115,000 at the end of last year, a decrease of 16,000 over the past year. On the other hand, the total amount of loans for self-employed people increased by 11 trillion won during the same period to 1064.2 trillion won. In other words, the amount of loans per self-employed person is increasing and the number of people who cannot pay their debts is increasing.
The number of vulnerable self-employed people, which means multiple debtors and low-income and low-credit self-employed people at three or more financial companies, increased by 31,000 in a year to 427,000 at the end of last year. Compared to three years ago, the number increased by 146,000. As a result, vulnerable borrower loans accounted for 11.8% of the total loans for self-employed people, up 0.8 percentage points in a year.
Amid growing concerns over loan insolvency due to the sluggish economy and high interest rates, the delinquency rate for already vulnerable self-employed people jumped 2.26 percentage points to 11.16 percent at the end of last year. This is close to the end of September 2012 (13.9%), when the delinquency rate for vulnerable self-employed people soared to an all-time high.
It is interpreted that the effect of policy support, such as the suspension of repayment of principal and interest for self-employed people, which was implemented during the COVID-19 pandemic, has disappeared, and loan insolvency has expanded as the economic slump has prolonged.
Under these circumstances, self-employed people's ability to repay loans is also decreasing. The average income of self-employed people increased slightly from 41.31 million won at the end of 2022 to 41.57 million won at the end of last year, but it has still not recovered from the level at the end of 2019 (42.42 million won) before COVID-19. The average income of delinquent self-employed people decreased from 39.83 million won at the end of 2020 to 37.36 million won at the end of last year, and their average loans increased from 205 million won to 229 million won.
The Bank of Korea pointed out that the insolvency of self-employed loans should be prevented in advance by taking preemptive measures through policy funds. Kim Jung-ho, head of the Bank of Korea's stability team, said, "We should adjust our debts through the new start fund for borrowers who are overdue and closed, and employment and re-startup policies should be pursued for self-employed people who wish to make a comeback."
Late payment rate for wage workers for 2 years
Credit loans decrease, and the number of people who talk about it increases
Job losses due to economic recession
Manufacturing workers are down for two months
As the construction industry continues to slump, the growth of workers employed by businesses has hardly recovered. Workers' loan delinquency has increased for the second consecutive year amid the continued cold spell in the job market as sluggish construction has shifted to manufacturing.
According to the results of the February Business Labor Force Survey released by the Ministry of Employment and Labor on the 27th, the number of workers in businesses with one or more employees stood at 1,957,000 as of February, up 22,000 (0.1%) from the same period last year. Although the number dropped by 22,000 in January, escaping the shock of the first decline in 46 months since February 2021, during the spread of COVID-19, the increase is still insignificant.
By industry, the number of workers decreased by 82,000 (-5.6%) in February in the construction industry, which has been on the decline for eight months since July last year. The decline, which was more than 100,000 in the previous month, has eased somewhat. The number of workers in the manufacturing industry, which has been affected by the sluggish construction industry, has been on the decline for two months. The number of manufacturing workers fell by 6,000 in February. In addition, the number decreased by 35,000 (-1.5%) in wholesale and retail businesses and by 11,000 (-0.9%) in accommodation and restaurant businesses due to the sluggish economy.
The areas that lead the job market are the health and social welfare services industries. The number of workers in this field increased by 97,000 (4.1%). It was followed by the professional, scientific and technical service industry (20,000 people, 1.5%) and the real estate industry (17,000 people, 3.9%).
As the employment cold spell continues, the delinquency rate of workers' loans is on the rise.
According to the 2023 Job Administration Statistics Wage Workers Debt released by the National Statistical Office, the delinquency rate of wage workers at the end of 2023 was 0.51%, up 0.08 percentage points from the previous year. It has been on the rise for the second consecutive year following a 0.02 percentage point increase last year. Bank delinquency rates rose 0.04 percentage points, while non-banks rose 0.19 percentage points. It is interpreted that the repayment capacity has declined due to the base rate hike that has continued since 2022. The average loan amount of workers in 2023 was 51.5 million won, up 0.7 percent from the previous year. The average loan amount, which had been steadily increasing since the survey began in 2017, fell for the first time in 2022, but it turned to an upward trend again.
Credit loans decreased due to high interest rates, but it is analyzed that mortgage loans increased. The mortgage loan increased 3.7 percent to 20.38 million won, exceeding the increase in non-housing mortgage loans (2.1%). On the other hand, credit loans fell 5.4 percent to 11.57 million won. An official from the National Statistical Office said, "Credit loans declined as interest rates rose, while the number of mortgage loans increased due to the launch of a 50-year mortgage loan."
[Reporter Oh Soo Hyun / Reporter Choi Ye Bin / Reporter Ryu Young Wook]
