P2P loan delinquencies hit record 8.5 percentPeer-to-peer (P2P) lending defaults soared recently, adding to concern about the relatively new financial service.
The average delinquency ratio of 45 P2P lending firms stood at 8.5 percent in April, the highest figure since an industry group began compiling the data in June 2016, according to the Korea P2P Finance Association.
The average delinquency ratio stood at 1.77 percent in April last year and 0.89 percent in April 2017. The average delinquency ratio rose to 7.54 percent in February, but fell to 7.07 percent in March.
P2P loans are extended to individuals or businesses through social network services and the internet. They include loans to start-ups and self-employed businessmen.
The rise in delinquencies at P2P firms came as loans to property development projects went bad as a result of the regulations to cool home prices.
Of the 45 P2P firms, eight firms saw their delinquency ratio rise above 20 percent, according to the data.
P2P companies are currently not under the direct supervision of the financial authorities in Korea. Financial authorities have said they will exercise oversight of such businesses if regulatory bills are approved.
Lawmakers have proposed five bills to regulate P2P lending firms, but the bills have received little support
With the bills pending, financial authorities have been struggling to tackle abusive and deceptive P2P lending practices.
Officials at the Financial Services Commission said disputes between investors and P2P lending firms were on the rise, and some P2P firms were raising funds illegally.
Lax regulation on entry into the P2P sector is one of the reasons for such problems, officials said.
BY PARK EUN-JEE, YONHAP [firstname.lastname@example.org]