[2026 National Assembly Audit] Nonghyup Mutual Finance Delinquency Rate Rises 4.3-Fold to the 5% Range in Four Years

Non-performing loans: 555.8 billion won -> 2.39 trillion won

An analysis has found that financial soundness problems in the National Agricultural Cooperative Federation's mutual finance business have become entrenched over the long term, rather than being a temporary setback. From 2022 through June this year, delinquency rates and non-performing loans worsened over the four-year period, while profitability and the capacity to absorb losses weakened.

A view of the National Agricultural Cooperative Federation headquarters in Seodaemun-gu, Seoul. National Agricultural Cooperative Federation.

According to the “Key Management Indicators for Mutual Finance” submitted by the National Agricultural Cooperative Federation to Song Ok-ju, a Democratic Party of Korea lawmaker on the National Assembly’s Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, the delinquency rate on all loans rose 4.31-fold, from 1.21% in 2022 to 5.22% in June this year. The rate on corporate loans climbed from 1.80% to 7.98%, while that on joint loans surged from 1.88% to 17.70%. Non-performing loans, which are difficult to recover, increased 4.3-fold from 555.8 billion won to 2.38611 trillion won, and their share of total loans rose from 1.49% to 5.71%.

The prolonged nature of the problem is also a concern. As of June, 888 cooperatives had loans overdue by six months or more accounting for over 50% of their total overdue loans. That was 80.1% of all 1,108 cooperatives. The figure had nearly doubled from 494 cooperatives, or 44.6%, in 2022.

The number of financially troubled cooperatives also increased. The number with delinquency rates of 10% or higher rose from six to 107, while the number with non-performing loan ratios exceeding 8% increased from nine to 315. By region, the largest numbers were in South Gyeongsang Province (57), North Gyeongsang Province (51), South Chungcheong Province and Sejong (50), and Gyeonggi Province (43). The number of cooperatives receiving a Grade 1 rating in management assessments fell from 802 to 482, while those rated Grades 3 to 5 increased from five to 66. Six cooperatives had net capital ratios below 4%.

Profitability also declined. Net income fell 45.1% from 229.56 billion won in 2022 to 126.11 billion won last year, while the return on assets (ROA) was cut in half, from 0.49% to 0.23%. The number of cooperatives with an ROA below 0.3% rose from 105 to 532, representing 48.0% of all 1,108 cooperatives.

Loss buffers weakened. From 2022 through June this year, non-performing loans increased 4.3-fold, while loan-loss provisions rose just 1.5-fold, from 891.56 billion won to 1.3047 trillion won. The office of Rep. Song said its calculations based on the data showed that the provision coverage ratio for non-performing loans fell from 160% in 2022 to around 55% in June this year. Sales of non-performing loans also began generating losses in 2024, with cumulative losses reaching about 197.8 billion won through June this year.

Deposit-related stability also deteriorated. Deposits fell by 7.441 trillion won, from 475.8994 trillion won at the end of last year to 468.4584 trillion won in June this year, while the deposit outflow rate rose from 0% to 1.56%. The number of cooperatives whose deposits fell by 8% or more year over year increased from 12 to 102, with South Jeolla Province (29) and North Jeolla Province (22) accounting for half of them.

The data also revealed limits in assessing the situation. According to Rep. Song’s office, the share of overdue interest in interest income, the share of loans with extended maturities, and the amount of refinancing loans to the same borrower were all listed as “unable to calculate.” Cases of exceeding the lending limit for a single borrower surged from four in 2024 to 452 in June this year. Among real estate-backed loans, which account for about 90% of total lending, the amount of loans with a loan-to-value (LTV) ratio exceeding 80% also quadrupled, from 133.17 billion won to 536.63 billion won.

The average net capital ratio has remained in the 8% range, but financial problems are accumulating at individual cooperatives.

Rep. Song said fundamental measures from the National Agricultural Cooperative Federation and financial regulators are needed.

“The financial soundness of local cooperatives is worsening as problems in the National Agricultural Cooperative Federation’s mutual finance business persist,” Rep. Song said. “Effective measures must be put in place, including reforming regulations such as restrictions on loans to non-members, which have long been cited as a chronic problem holding back the mutual finance business.”

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