Lee slams capital firms for high rates
During a visit to a state-run microcredit bank yesterday, President Lee Myung-bak railed against conglomerates for operating high-interest loan services, accusing the companies of “loan-sharking” and practicing “social injustice.”
Lee and his economic and finance officials paid a visit to the Smile Microcredit Bank’s branch in Hwagok-dong, Gangseo District of southwestern Seoul, to meet people using the service. Founded in December 2009 with money from abandoned bank accounts and contributions from Korean banks and companies, Smile’s 48 branches have lent 9.32 billion won ($7.74 million) to 1,204 people as of June 11. Smile branches are often operated by the private companies that sponsor the program.
At the branch, which is operated by Posco, Lee talked to a 42-year-old clothing and shoe saleswoman, who applied for a 10 million won loan from the microcredit program because of her poor credit history. The woman showed Lee records of a loan from a finance company operated by a conglomerate, and Lee was startled at the high interest rate. Lee turned to Chin Dong-soo, chairman of the Financial Services Commission, and asked about interest rates charged by lending companies run by conglomerates, and Chin said they ran 40 percent to 50 percent.
“That’s loan-sharking,” Lee exploded. “I didn’t know interest rates were so high at the capital companies. How can the people pay back more than 40 percent in interest by selling shoes? What are these big companies thinking?”
Non-bank financial companies are often called “capital firms” in Korea.
Lee, who was once president of a conglomerate, told the woman that the conglomerate she borrowed from also runs a Smile program. He advised her to visit the company’s Smile branch, receive a loan and pay back her high-interest loan.
When Chin tried to calm Lee down by saying that loan sharks, who are illegal, actually charge much higher interest rates than capital companies, Lee continued to express his displeasure in candid words.
“It is a social injustice when a conglomerate charges such a high interest rate,” Lee said. “I never imagined that capital companies were lending money with such a high rate. I did not know what was really going on.”
Lee also said conglomerates should not charge high interest rates because they raise money by issuing bonds, on which they pay low rates of interests. Lee said he wants conglomerates to pay more attention to the microcredit business.
By Ser Myo-ja [email@example.com]