Microcredit Loans to Go to Low-income Earners

Low-income families and people with poor credit from next month can apply for government-sponsored and low-credit microcredit up to 20 million won (13,400 U.S. dollars) per person to start their own businesses.

The Health, Welfare and Family Affairs Ministry yesterday said microcredit loans will not just go to groups, but also to low-income earners to support themselves. Loan applications from individuals will be accepted from next month.

“People from low-income families are among those eligible for loan applications, so this will significantly boost the campaign to help households eliminating debt, a campaign co-sponsored by The Dong-A Ilbo and Hana Financial Group,” a ministry source said.

Ryu Yang-ji, head of the ministry’s financial support for self-reliance department, said, “We are considering measures to examine an applicant’s financial status through financial data obtained by the campaign, and provide an unsecured loan to those proving their ability to repay back the loan and their business feasibility.”

The budget for the program will jump from two billion won (1.34 million dollars) last year to 13 billion won (8.74 million dollars) this year, and select financial institutions will be designated for the microcredit operation this month. In other words, about 1,300 people can receive the loans if an individual applicant can get an average loan of 10 million won (6,724 dollars).

In a similar vein, financial authorities are expected to activate the microcredit system to allow people with poor credit to take out low-interest loans, while encouraging commercial banks to introduce financial products offering low interest rates.

The Financial Services Commission will secure the budget to support individuals with low incomes in the extra parliamentary session this month. The size of loans for individual applicants will be expanded through existing microcredit agencies such as the Dormant Account Management Foundation and the Social Solidarity Bank.

parky@donga.com