FSC Seeks KRW 377 Billion in Microfinance Budget Increases and New Funding; Sunshine Loan to Refund Half of Interest

FSC Seeks KRW 245.5 Billion Increase for Sunshine Loan and KRW 100 Billion for K-Minsaeng Jikim Loan
KRW 31.5 Billion in New Interest Subsidies for Stepping Stone Loan; National Assembly Budget Review in Focus

The Financial Services Commission (FSC) has asked the National Assembly to increase the relevant budget to ease interest burdens on financially vulnerable groups, including borrowers with mid- to low credit, and expand the supply of policy-backed microfinance.

According to materials the FSC submitted to the National Assembly's Political Affairs Committee, the commission said the budget for the Sunshine Loan Special Guarantee and the K-Minsaeng Jikim Loan should be increased, and new funding should be allocated to lower interest rates on the Stepping Stone Loan.

First, the FSC asked for an additional KRW 245.5 billion on top of the government's proposed KRW 82.8 billion budget for the Sunshine Loan Special Guarantee to introduce an interest cashback program for borrowers who repay their loans faithfully.

The Sunshine Loan Special Guarantee is a product that provides loans of up to KRW 10 million to low-income, low-credit borrowers at an annual interest rate of 12.5%. The FSC plans to refund 50% of the interest paid at the end of each year to borrowers who have faithfully repaid their loans for at least one year, bringing their effective interest burden down to around 6.3% per year.

The FSC also asked for KRW 31.5 billion in new interest subsidy funding for the Stepping Stone Loan, which is designed to help users of policy-backed microfinance gain access to bank loans.

The Stepping Stone Loan allows borrowers who have faithfully repaid policy-backed microfinance loans to borrow up to KRW 30 million from banks at an annual interest rate of no more than 9%. The FSC plans for the government to subsidize 3 percentage points of the interest rate, lowering loan rates to no more than 6% per year and bringing the average rate down to the 4% range.

The FSC requested an additional KRW 100 billion to expand the supply of the K-Minsaeng Jikim Loan, which provides low-credit borrowers with KRW 1 million at an annual interest rate of 4.5% for up to 10 years. The plan is to support borrowers' financial independence by gradually connecting those who repay their loans faithfully with Miso livelihood loans for vulnerable groups and the Stepping Stone Loan.

The FSC also called for increased budgets for the New Start Fund, which restructures the debts of small business owners and self-employed people affected by COVID-19; a program to purchase long-term delinquent debt; and a program supporting the appointment of debt representatives.

The requested budget increases are intended to strengthen support for policy-backed microfinance as part of the government's “Three Major Livelihood Projects.” President Lee Jae Myung has also recently called on the FSC to prepare more ambitious measures to support low-income households.

However, the outcome of the budget bill remains uncertain, with some lawmakers saying the proposed increase is excessive. The National Assembly's Political Affairs Committee is scheduled to hold a budget subcommittee meeting on November 10-11 to review the budget under the FSC's jurisdiction.

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