Small businesses, self-employed individuals to receive interests back

[Photo by Yonhap]

South Korean lenders will reimburse up to 3 million won ($2,304.2) in interest to small businesses and self-employed individuals starting from February 2024, as part of a financing program to help relieve the burden due to high interest rates of near 5 percent.

During a meeting with Financial Services Commission Chairman Kim Joo-hyun and Financial Supervisory Service Governor Lee Bok-hyun on Thursday, the Korea Federation of Banks and 20 lenders announced a plan to provide bank loan users with support worth more than 2 trillion won.

Criticisms rose as banks had been taking advantage of high interest rates to earn record profits, and the financial authorities called on them to come up with financing plans to share the financial burden.

The 2 trillion support is the largest social contribution the banking sector has ever made to support people’s livelihoods.

The latest plan consists of a basic program under which 18 banks, including KB Kookmin, Hana, Shinhan, and Woori, will reimburse interest to 1.87 million self-employed and small business owner. There is also an optional program that allows each bank to create its own customized support measure for vulnerable groups.

The Korea Development Bank and the Export-Import Bank of Korea will provide additional support through separate policy financing.

The combined interest cashback to be offered by the 18 banks is worth 1.6 trillion won and is available to borrowers with personal business loans as of December 20.

Under the program, 90 percent of the interest payment will be reimbursed for a loan with an annual interest rate over 4 percent in the past one year, limited to 200 million won in loans per borrower.

The maximum reimbursement per borrower is 3 million won, and the average interest refund per borrower amounts to about 850,000 won.

The banks plan to establish an interest refund implementation plan by mid-January next year and start refunds in February. The program is expected to get halfway through implementation by March.

The budget of the optional program is 400 billion won, and each bank can create its own plan to support the vulnerable groups in society. Support measures being considered include electricity and rent support for small businesses and self-employed people.