Due to prolonged domestic recession and high interest rates, one in twenty self-employed individuals in South Korea is unable to repay their business loans, a figure that has more than tripled in the past five years.
Recent data from the National Assembly reveals that the number of self-employed business owners in South Korea unable to meet their loan repayments has significantly increased, reaching over 16,600 individuals as of last year. This represents 5% of all individual business loan holders, with a staggering total of 1132 trillion won in loans. The number of debt delinquent self-employed individuals has tripled over the last five years, indicating a troubling trend in the financial health of small businesses in the country.
The rise in defaults is attributed to the persistent high interest rates following the COVID-19 pandemic, which have made it increasingly difficult for individuals who borrowed at low interest rates to repay their loans as rates have subsequently risen. Despite a planned reduction in the base interest rate by the Bank of Korea, the freeze on interest rates since last year continues to burden borrowers, particularly affecting the repayment capabilities of many small business owners.
Moreover, the crisis seems particularly acute among older borrowers, with the number of financial delinquents over the age of 60 increasing from approximately 7,191 in 2020 to 38,185 last year—an astounding fivefold increase. This demographic shift, combined with deteriorating loan quality across non-bank sectors, underscores the urgent need for targeted support and interventions for the self-employed and small businesses, who are facing unprecedented challenges amidst economic instability.
