Back To Top

SME loans from nonbank lenders grow at fast pace

South Korean nonbank financial institutions' lending to smaller firms surged nearly 10 trillion won ($8.8 billion) in the first four months of the year amid tighter government control on household loans, data showed Wednesday.

Nonbank lenders' outstanding loans to small and medium enterprises came to 90.7 trillion won as of the end of April, up 9.9 trillion won from the end of last year, according to according to the data from the Bank of Korea. 


It marks the first time in history that the amount of SME loans from nonbank lenders has surpassed the 90 trillion won mark.

The January-April increase represents a 2.8-fold rise from the amount that expanded during the same period a year earlier.

If the current pace continues, nonbank lenders' loans to SMEs for all of 2017 are forecast to outstrip the 19.9 trillion won posted last year.

The on-year growth rate of nonbank institutions' SME loans hit 12.3 percent in the January-April period, far higher than the 2.7 percent gain for bank lending.

Analysts attributed the surge in nonbank lenders' loans to SMEs to the financial authorities' strengthening of rules for loans to consumers in a bid to curb the country's snowballing household debt.

"There is a high possibility that government efforts to rein in household debt, combined with a drop in corporate credit risks stemming from an economic recovery, may prompt nonbank lenders to extend more loans to SMEs," a member of the BOK's monetary policy board told a board meeting on May 25.

Market watchers pointed out that the financial authorities should keep tabs on a surge in nonbank institutions' high-interest loans to SMEs, which could undercut their financial health down the road.

Nonbank financial institutions, including savings banks, usually charge interest roughly twice as high as bank lending rates.

South Korea is struggling to keep soaring household debt in check. The nation's household debt, including credit purchases, hit a record 1,359.7 trillion won at the end of March. (Yonhap)