Seoul: The reliance on bank loans among self-employed South Koreans has surged considerably since the onset of the pandemic, with the overall loan volume and the default rate rising steeply in the past four years.

According to data from the nation’s major credit ratings firm Nice, provided to Representative Yang Kyung-sook of the main opposition Democratic Party of Korea, the outstanding loans to self-employed individuals from local financial institutions totalled 1,112.74 trillion won or about US$811bil as of the end of March.

The figure, inclusive of household and business loans, represents a significant 51% increase from the pre-pandemic level four years and three months ago. In late 2019, some 2.1 million individual business owners had borrowed approximately 738.6 trillion won.

Since then, the number of indebted individual business owners has also surged by 60% to 3.36 million this March.

Of particular concern is the steep rise in default rates. Over the same period, loans overdue for more than three months have doubled, from 15.62 trillion won to 31.3 trillion won.

This indicates that 2.8% of the total loans granted to individual business owners are now at risk of default, up from 2.1% in 2019. Year-on-year, the default balance surged by 53.4% from 20.4 trillion won tallied in March last year.

Nearly half of the self-employed individuals in debt have borrowed from three or more lenders, with around 1.72 million borrowers owing 689.72 trillion won in total.

Compared to 2019, both the number of individuals with multiple loans and their loan balance have surged by around 60%.

Those with multiple debts are encountering increasing challenges in repayment.

Among all loans held by these debtors, approximately 24.75 trillion won is overdue, more than doubling the 12.12 trillion won recorded in 2019 and marking a 52% rise from the previous year.

The proportion of delinquent loans by these multiple debtors relative to the total default loans by the self-employed has also risen slightly, from 77% at the end of 2019 to 79% in March.

Furthermore, the default rates are notably higher among younger self-employed individuals.

As of the end of last year, the rate was highest among those under 30, with around 6.59% having loans behind schedule for more than three months.

Those in their 30s followed at 3.9%, trailed by those in their 40s at a 3.61% default rate.

Both individuals in their 20s and 30s experienced the largest increases in the overdue rate, each surging by 2.22% and 1.63%, respectively, compared to the previous year.

 - ANN