Despite Government Push for 'Stepping Stone Loan', Top Four Banks Handle Less Than 1%

New Stepping Stone Loan Approvals Reach 14.11 Billion Won Between January and August
Major Four Banks Account for Just 130 Million Won

The government has restructured the "Stepping Stone Loan," a policy-based microfinance product, to help diligent low-income borrowers transition into the commercial banking sector. As a result, the total amount of Stepping Stone Loans handled this year has increased. However, the share processed by the four major banks (KB Kookmin, Shinhan, Hana, and Woori) was found to be below 1%.

According to data submitted by the Financial Supervisory Service to Min-gyu Park, a member of the National Assembly's Political Affairs Committee of the Democratic Party, the volume of new Stepping Stone Loans handled by banks between January and August this year reached 14.11 billion won. During the same period, there were 854 cases executed, and as of the end of August, the outstanding loan balance stood at 12.797 billion won.

The Stepping Stone Loan is part of the 'credit build-up' system that allows users of policy-based microfinance who have been making payments diligently to obtain credit loans through banks at annual interest rates below 9%.

At the end of last year, the government relaxed some of the eligibility requirements for Stepping Stone Loan support while requiring applicants to undergo a "unified credit evaluation model" review, and has been working to expand the supply.

Consequently, the volume handled has increased this year. The amount dropped from 172 million won in 2021 to 34 million won in 2024, then rose to 97 million won last year. This year, by August alone, it reached 14.11 billion won—an increase to 145 times last year's annual volume.

However, most of this increased loan amount was concentrated in a few banks.

Between January and August this year, iM Bank had the largest amount of new loans, totaling 6.99 billion won, while IBK (Industrial Bank of Korea) followed with 5.977 billion won. Together, these two banks accounted for 12.967 billion won, or 91.9% of the total volume.

In contrast, the share of the four major banks was negligible. These banks executed only nine cases of Stepping Stone Loans. Their combined new loan amount was 130 million won, making up just 0.9% of the total.

By bank, Woori Bank processed 80 million won, Shinhan Bank 34 million won, and KB Kookmin Bank 16 million won. Hana Bank did not process any new Stepping Stone Loans this year, stating that they are instead handling alternative products such as Saeimang Holssi and mid-interest rate loans. NH Nonghyup Bank executed about 259 million won in loans.

The office of Assemblyman Park pointed out that bank sector supply remains insufficient relative to demand for this policy. According to the office, the Korea Inclusive Finance Agency estimates annual demand for new Stepping Stone Loan funds to reach 348,000 applicants and 1.25 trillion won. The volume handled by banks falls far short of this estimate.

Assemblyman Park commented, "Financial authorities have not even set specific supply targets, and the four major banks are essentially turning their backs on the Stepping Stone Loan. Authorities must put forward practical measures to encourage banks to handle more of these loans, and banks must also fulfill their social responsibility by connecting 'financial ladders' for mid- and low-credit borrowers."

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