Debt incurred by self-employed businesses in South Korea has reached 521 trillion won ($459 billion) and countermeasures are in the works, a senior official said Friday.
Speaking at a financial forum, Kim Yong-beom, vice chairman of the Financial Services Commission (FSC), said some 6 percent of the loans have been extended to poor-credit borrowers, putting them at high risk of default.
Kim based his remarks on data provided by local credit appraiser Nice Information. The total includes both corporate and personal loans.
Some of the self-employed people's debt has been included in South Korea's total household debt estimated at 1,400 trillion won, but a considerable portion has been excluded.
Kim said the financial watchdog will come up with a loan-screening model for self-employed borrowers in an effort to rein in the sector's growing debt.
"A new set of guidelines will be introduced to curb loans to property rental businesses, cited as the main culprit for the surge in the debt of the self-employed sector," he said.
Such guidelines and other steps to keep self-employed people's debt in check will be included in a package of government measures to manage household debt, which is slated to be unveiled in mid-October.
"Excessive household debt is the great risk factor for finance for the public," Kim said. "The financial watchdog will try to find a stable solution to debt risk management in a bid to improve household income."
The government is desperate to curb snowballing household debt as it could come as a "time bomb" for Asia's fourth-largest economy still struggling with slowing exports and flaccid domestic demand. (Yonhap)