Self-employed get a break

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Self-employed get a break

The Financial Supervisory Service (FSS) said yesterday that it will introduce a loan-restructuring program to help self-employed business owners facing liquidity constraints.

The ultimate goal of the plan, also known as a pre-workout, to be introduced by banks under the guidance of the financial watchdog, is to reduce interest rates on loans and extend repayment schedules.

Although financial regulators have used pre-workout programs for consumer mortgages, this is the first time they have been made available to self-employed business owners.

According to the FSS, self-employed business owners took out a total of 253 trillion won ($232.9 billion) in loans in 2012, or 22.8 percent of all loans.

Of the 253 trillion won, self-employed business owners have borrowed 173.5 trillion won in corporate loans, an increase of 15.1 trillion won year-on-year, and 79.1 trillion won in household loans, an increase of 2.3 trillion, the financial watchdog said.

By sector, loans to self-employed business owners running real estate and leasing services showed the largest year-on-year rise (7.5 trillion won), followed by accommodation and restaurants (1.9 trillion won), and wholesale and retail (1.8 trillion won).

“Loans extended to these sectors jumped because of the increase in leasing of officetels and investment in commercial real estate properties,” said Lee Ki-youn, an FSS deputy governor. “More baby boomers who retired have launched their own accommodation businesses and restaurants.”

Lee noted that self-employed business owners who have bank loans tend to be engaged in industries that are sensitive to market conditions and less capable of repaying loans on contract deadlines compared to salaried workers.

The default percentage of corporate loans taken out by self-employed people was 0.89 percent in 2012, compared to 0.8 percent in 2011 and 0.86 percent in 2010, according to the financial regulator.

The FSS said the number of self-employed workers grew by 10,000 to 5.53 million in 2012 compared to 5.52 million in 2011.

In 2012, 24.1 percent of the income of self-employed business owners went to cover debt, an improvement from the 29.1 percent needed in 2011, but still higher than salaried workers’ 16.6 percent and temporary and day workers’ 19.4 percent, it said.

It said 28.2 percent of workers are self-employed entrepreneurs in Korea’s labor force, much higher than the average of 16.1 percent for the OECD.

Korea’s percentage of self-employed business people is much higher than England (13.9 percent), Japan (11.9 percent), Germany (11.6 percent), the United States (7 percent) and Canada (9 percent).

By Kim Mi-ju []
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