[Work Report] Sunshine Loan Interest Payback... New Policy Loan Allows Borrowing 1 Million Won at 4.5% per Year, Up to 10 Years for Repayment

Introduction of Inclusive Finance Evaluation Framework for Financial Companies
Establishment of People’s Financial Stability Fund
…Alleviating Interest Burden for Sunshine Loan Special Guarantee
Youth Initial Asset-Building Program to Launc

The government will introduce a new policy loan program that, after an in-person screening process, lends up to 1 million won at an annual interest rate of 4.5% for up to 10 years. Additionally, it plans to launch the People's Financial Stability Fund, which aims to lower the effective interest rate for diligent repayers of the special guarantee product under the Sunshine Loan from the current 12.5% to around 6.3%.

On July 15, Lee Eogwon, Chairman of the Financial Services Commission (FSC), announced the "Major Achievements and Work Directions & Key Projects for the First Half of 2026" at a joint policy briefing themed "An Irreplaceable Korea through Economic Leap Forward."

Following last year's briefing, the government has once again presented expanding inclusive finance as a core task this year. The FSC will first expand the comprehensive evaluation framework for inclusive finance, starting with the banking sector this year and including all financial sectors by next year. Furthermore, it will implement the introduction of the Chief Inclusive Finance Officer (CIFO) system, responsible for overseeing inclusive finance strategies and internal controls within financial institutions. These measures are intended to reflect inclusive finance in the overall management and evaluation of financial companies.

The offering of inclusive financial products aimed at easing the interest gap for mid- and low-credit borrowers will also be expanded. The supply of the Saeheumangholssi (New Hope Loan) will be increased by 2 trillion won by 2028, and the target ratio of loans to mid- and low-credit borrowers by internet-only banks will be raised to 35%. This year, the planned supply of medium-interest loans stands at 31.9 trillion won. In addition, Industrial Bank of Korea will launch a new loan product for mid- and low-credit borrowers at a fixed annual interest rate of 4.9%, regardless of credit rating. Details of the product will be separately announced by the bank. The five major financial holding groups also plan to contribute an additional 500 billion won from private donations to support Smile Microcredit.

The establishment of the People's Financial Stability Fund is also in the works. The fund will be used to ease the interest burden of the special guarantee under the Sunshine Loan and expand the supply of Sunshine Loan Youth. Shin Samucheo, a secretary from the FSC, said, "For borrowers who diligently repay their special guarantee under the Sunshine Loan, we are discussing with budget authorities the possibility of refunding about half of the 12.5% interest so that their final effective rate can be reduced to 6.3%. The scale of this program is the key consideration."

Loan products connecting welfare programs with formal financial institutions will also be unveiled. Previously, illegal loan prevention products allowed up to 1 million won in loans for a short maximum period of two years, drawing criticism for the limited repayment window. In response, the FSC will launch a new product enabling loans of up to 1 million won at an annual rate of 4.5% for up to 10 years. Shin Jinchang, Secretary-General of the FSC, stated, "If borrowers diligently repay about 10,000 won per month, it will help them build credit, and in the long term, we are considering expanding the support cap to 5 million won, acting as a 'credit ladder' for future growth."

However, to prevent moral hazard, the program will be strictly based on in-person screening to select and support only vulnerable individuals genuinely in need of funds. Financial support will not be limited to simple loans; those needing welfare services will also be linked with the relevant welfare programs for additional assistance.

Debtor protection measures will also be strengthened. The FSC will ensure the smooth purchase and write-off of long-term delinquent bonds held by SPCs such as Sangnoksoo through the New Leap Forward Fund. Plans for the management of overdue bonds held by public agencies will also be prepared and announced promptly. Furthermore, the overall non-performing loan (NPL) market will be reviewed, and the planned shift to a permit system for loan purchase and collection companies will proceed as scheduled.

The debt adjustment process will be streamlined as well. The FSC will establish a system allowing debtors applying for personal rehabilitation or bankruptcy to obtain debt certificates, currently scattered across various financial institutions, in a single issuance from the Credit Counseling & Recovery Service. This is expected to ease the time and cost burden for debtors. As a result, the cost of issuing a debt certificate is expected to drop from the current approximately 25,000 won to around 5,000 won, according to the FSC.

Financial support for young people and small business owners will also be expanded. In August, Korea Credit Guarantee Fund and Industrial Bank of Korea will collaborate to launch the "Promising Youth Start-up Guaranteed Loan." This program will provide up to a 1.5 percentage point preferential interest rate and 100% guarantee for companies led by entrepreneurs under 39 years old and operating for less than seven years. The scale of policy finance for youth start-ups will also be increased to 2.2 trillion won this year. In addition, alternative credit evaluations will be introduced so that young people and foreigners with insufficient credit histories can obtain credit cards, and in cases where credit history checks are difficult, deposit-backed credit cards will be allowed.

A new program to help young people build assets will also be launched. The FSC will introduce an early-stage asset-building program for young people utilizing the capital market in December and, together with existing youth support policies such as the Youth Leap Account, construct a medium- to long-term asset-building ladder. Furthermore, the proportion of the second round of People's Participation Growth Fund (600 billion won) allocated to low-income groups will be expanded from 20% to 50%, increasing participation opportunities for young people.

Support for small business owners will also be expanded. From August, the AI-based small business-specialized credit assessment model (SCB) will be extended to 16 banks, and the scale of support under the Small Business The Dream package will be increased to 12 trillion won. The application period for the Fresh Start Fund will be extended through next year, and efforts will be made to expand cross-border QR payment services to enhance financial convenience for foreign tourists.

This content was produced with the assistance of AI translation services.