Tied up in red tape

Did we learn nothing from face masks? Applicants for 10 million won ($8,000) loans offered by the government are waiting in long lines to get money they need urgently. Small merchants and mom-and-pop store owners across the country are complaining about the long, confused queues in front of the Small Enterprise and Market Service (Semas) and commercial banks each day. “It is more difficult than winning the lottery,” fumed a self-employed person who could not get the loan from Semas on Thursday morning.

The Moon Jae-in administration began offering emergency loans at the annual interest rate of 1.5 percent after hurriedly appropriating a 2.7 trillion won budget last month to prevent people from going bankrupt amid the Covid-19 crisis. Alarmed by the long lines of applicants every morning, the government asked applicants to visit Semas on alternate days based on their resident registration numbers and extended the emergency loan services to commercial banks from Wednesday. That only deepened confusion. Due to an avalanche of applications for the loans, including online, staffers at Semas and banks were overwhelmed.

Given the enormous demand for such loans, some level of inconvenience is unavoidable. However, the problem is exacerbated by a complex set of procedures for getting the loans based on credit histories. The government advised applicants to prepare three documents instead of seven as in the past to streamline the application process. But the remaining information had to be checked through Semas’ administrative network. That backfired because it ended up decreasing the number of applicants.

A majority of small merchants and the self-employed have to go to Semas to get the loan because they have poor credit ratings. However, based on the belief that half of them have better credit ratings, the government recommended they go to commercial banks. As a result, some sort of a ping-pong game took place between Semas and the banks over who should deal with them.

Those applicants need loans to stay afloat. The Korea Economic Research Institute said that 63.4 percent of merchants are worrying about their survival if the current situation continues for six months. Their average sales plunged 42.8 percent in February and March compared to the same period in 2019.

To help them survive, the government must provide the loan fast. When the country is in a crisis, red tape must be eliminated.