The ruling party and the government agreed to abolish the joint liability system for self-employed businessmen when they apply for loans from May in a bid to lessen the burden on new businesses and boost entrepreneurship, the party’s chief policymaker said Tuesday.

Rep. Lee Joo-young of the Saenuri Party held a meeting with senior officials of the Financial Services Commission at the National Assembly and reached an agreement to adopt a package of measures aimed at helping self-sufficient businessmen and those who failed at least once in earlier business endeavors.

“It is time to unfetter the shackles of joint liability that makes one mistake lead to a lifetime setback,” Lee said at a party meeting.

Korea’s financial institutions have customarily required private business owners to have their families and relatives stand for surety for debt repayment liability if they go bankrupt.

For corporations, only executives and their business partners will be bound to the joint guarantee contracts under the new scheme.

Out of some 800,000 private business owners and their acquaintances currently under the joint loan liability, about 440,000 will be gradually freed from the guarantee in the next five years, according to the FSC.

The party and the financial regulator plan to establish a committee under the state-run credit counseling service to help those, whose early business failed, start new enterprises, Lee said.

The two sides also will cooperate with each other to beef up the credit restoration program to free broke businessmen from delinquency status and make them eligible for carrying out financial transactions, he noted. 

(Yonhap News)