Shinhan Bank, the banking unit of Shinhan Financial Group, adopted an independently developed credit rating model to assess loan applications of low-credit customers, the bank said Sunday.

The “Hope Credit Assessment Model” is the country’s first attempt to invent and apply a separate barometer to rate the credit of low-income customers, the bank stated.

The Hope Credit Assessment Model is expected to benefit many low incomers who had been marginalized in the general credit assessment system, under which all economic brackets are equally assessed. 

Applying an equal credit measuring model has suppressed financial transactions of low-income, low-credit customers, despite their increased need for loans.

“We came up with the Hope Credit Rating to meet the rising demand for loans among the financially underprivileged,” Shinhan Bank spokesperson said.

“The new rating model is applied to certain low-incomers’ loan plans like the New Hope Seed Loan and New Hope Dream Loan, after winning approval from the regulator,” the spokesperson added.

Now low-credit customers are given more options for loans, as they can choose from regular loan plans with higher borrowing limits and interest rates, or from the lower-limit, lower-rate Hope Credit Assessment loan plans.

Shinhan Bank expects the new credit assessment model to yield a “more accurate reviewing of credit” to help improve the financial flexibility of low-income borrowers.

Faster loan procedures and cheaper interest rates are two goals of developing the independent model, the bank stated.

The Hope Credit Assessment Model is an extension of the bank’s household-debt-relieving solutions.

In November 2012, the group vowed to take part in the government’s objective to fight soaring household debt, by reducing the interest burden and readjusting the payment period for families temporarily facing financial difficulties.

“We will stick to the idea of ‘warm-hearted financing’ by strengthening our portfolio of loan plans for low-income, low-credit customers,” Shinhan Bank said in a statement.

By Chung Joo-won (joowonc@heraldcorp.com)