People's Finance Stability Fund Introduction Effectively Canceled for Next Year

Mandatory Contributions from Financial Institutions
10-Year Extension Approved until 2036
Passed by Parliamentary Standing Committee

The introduction of the People's Finance Stability Fund, a state policy project aimed at securing resources for policy-based finance for low-income individuals, has effectively fallen through for next year. However, the extension of the sunset provision allowing financial institutions to contribute to policy-based finance for the disadvantaged has passed the parliamentary standing committee, thereby averting an immediate funding gap.

According to financial authorities and the National Assembly on September 6, the State Affairs Committee passed a revision bill at their general meeting on September 3, extending for 10 years the validity period for financial firms to contribute to the Korea Inclusive Finance Agency. The revision, an amendment to the Act on the Support for the Financial Life of the Underprivileged, was approved in the committee.

The current act obliges financial companies to contribute a certain amount to the Korea Inclusive Finance Agency. The committee has passed an extension of the sunset provision for mandatory contributions—from its current expiry date of October 8 next month—to October 8, 2036. The bill is expected to be addressed at the plenary session no later than early next month.

Financial regulators had prioritized enacting the new fund within this year. It was a major campaign pledge of the President and a central government policy task. The objective was to ensure policy continuity and operational flexibility by establishing a legal basis for continuous contributions from the financial sector and for government loss coverage.

However, opposition parties maintain a cautious stance on formalizing the fund, arguing that the current system is already sufficient to support low-income groups.

According to a consulting report titled "Establishment and Operation Plan for the People's Finance Stability Fund" commissioned by Korea Inclusive Finance Agency, the expected policy finance loss from fund operations is projected to reach 237.9 billion won in the first year (next year), 486.8 billion won in 2028, 746.7 billion won in 2029, 1.0176 trillion won in 2030, and 1.2995 trillion won in 2031.

However, the report analyzed that, “The sum of the present value of the total benefits was calculated at 4.7046 trillion won, while the sum of the present value of the total costs was 4.2929 trillion won.” This means the benefits outweigh the costs, confirming that there is sufficient economic validity for the fund.

From the government’s perspective, the establishment of the statutory fund, originally aimed for implementation next year, has now become a ‘long-term project.’

An official from the financial authorities stated, “We can prepare now and implement it the year after if needed,” adding, “Even if it isn't immediately turned into a fund, the supply of financial products will not be suspended, so we will calmly prepare for fund operation and management.”

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