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| A man waits for a consultation to find out if he can apply for a loan at the Korea Inclusive Finance Agency in Seoul, Monday. Korea Times photo by Hong In-ki |
By Lee Yeon-woo
On Tuesday morning, a man in his 60s sighed as he pressed the button for the elevator in front of the Korea Inclusive Finance Agency in Seoul. Looking exhausted, he was holding several documents received during a consultation with the agency. He had just applied for an emergency loan offered by the government.
Reluctantly, he shared his story. His business went bust during the COVID-19 pandemic, and he desperately needs some cash now. "The amount (offered by the government) isn't that big, but it's better than nothing … Still, it would have been better if they had offered a higher limit," the man said, asking for anonymity.
The loan he received was 500,000 won ($385.12) at 15.9 percent per annum, which comes out to an interest payment of 6,416 won per month.
On March 20, the Financial Service Commission (FSC) launched an "emergency loans program" to support people struggling with livelihood costs. Those in the bottom 20 percent of credit ratings and who have an annual income of 35 million won or less can apply for the program.
The program has drawn huge attention from financially vulnerable individuals. On the first day of the reservation period, the server crashed due to an overflow of people trying to register for a consultation. Applicants are required to go through a consultation at the Korea Inclusive Finance Agency before they can receive loans.
On Monday, the first day when the loan was actually offered, 1,126 people across the country received the loans.
"We didn't expect there would be such high demand. We're seeing that many people need small amounts of money to cover their living costs more than we initially thought," Lee Hye-rim, a consultant at the Korea Inclusive Finance Agency in Seoul, said to the reporters on Monday.
Despite its success, some have criticized the government for requiring "too much" from those who are already struggling.
"If the government imposes so many conditions for the program, it will create a high threshold for people who desperately need loans for their living costs. It's a small amount of money, just 1 million won (maximum). I don't understand why the government is charging a 15.9 percent interest rate," said Rep. Kim Byung-wook of the main opposition Democratic Party during a session at the National Assembly.
The FSC explained that the program is aimed at protecting the vulnerable who may otherwise resort to illegal private financing. According to the data provided by FSC, the average annual interest rate for such financing is 414 percent. The program also offers various consulting services for self-support, including guiding them to land a job.
The FSC plans to increase the number of consulting staff and explore ways to expand the supply of loans, which is capped at 100 billion won. "We will continue to make efforts to provide practical assistance to the people in need, and collaborate with relevant institutions, if needed, to secure additional financing," said Kim Joo-hyun, Chairman of the FSC.
