NEWS WIRE: Korea: More low-income help on the way

Source: Joong Ang Daily.


Original news wire here.

The government yesterday pledged to provide loans and credit guarantees to the self-employed, including legitimate street vendors, to help people in the lower credit and income bracket overcome financial hardship.

The plans were jointly laid out by the Finance Ministry, the Welfare Ministry, the Financial Services Commission and the Small and Medium Business Administration.

They came as the recent economic downturn is seriously weighing on entrepreneurs whose earnings are shrinking but who cannot afford to borrow money from banks due to their bad credit status.

They have had no choice but to rely on private loan providers and loan sharks, who fleece borrowers with immensely high interest rates.

Among the beneficiaries of the government-backed loans, shop owners can borrow up to USD 3,710 (5 million won) while street vendors will be allowed to borrow a maximum of USD 2,229 (3 million won).

They will be required to pay 1 percent of the principal in guarantee fees. A total of USD 74.3 million (100 billion won) is expected to be earmarked for this unprecedented measure.

Sixteen credit guarantee foundations run by local governments will be providing credit guarantees. However, credit defaulters or vendors operating in districts where local administrations ban such acts will not be eligible for the loans.

The Welfare Ministry will expand the scope of beneficiaries of its microcredit scheme, an extension of small loans that do not require collateral or guarantees.

Previously, only communities consisting of low-income citizens trying to get out of poverty through running small businesses were eligible for microcredit.

The ministry now plans to cater to lower-income individuals who would otherwise have no other source of income. The budget for microcredit has multiplied by more than sixfold, from USD 1.486 million (2 billion won) last year to USD 9.66 million (13 billion won) this year.

Recipients will be allowed to borrow up to USD 7, 431 (10 million won) at an annual interest rate of 2 percent. The ministry plans to designate a nonprofit organization to operate the business in February, with services to start in March.

Should a person who shut down his enterprise in less than two years ago be willing to launch a new business, the government will lend as much as USD 9.66 million (50 million won) at an annual 4.74 percent interest rate over a maximum period of five years.

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