MICROCAPITAL BRIEF: South Korea to Investigate Interest Rates Charged by Microfinance Institutions

The South Korean Financial Services Commission, South Korea’s financial industry regulator, announced that it will begin an investigation into the interest rates charged by microfinance institutions on loans and that it will implement corrective action as necessary.

The annual interest rate charged on microloans in South Korea is reportedly an average of 32.6 percent. South Korean financial authorities estimate the cost of microloans including loan servicing and bad debt reserves to be a combined 10 percent.

To review the interest rates, the Financial Services Commission and the Financial Supervisory Service, the financial institution regulator under the supervision of the Financial Services Commission, will create an investigative team to evaluate microfinance institutions’ costs as compared to interest rates and fees charged, and conduct follow up investigations as necessary.

By Jennifer Shevock, Research Associate

About the Financial Services Commission (South Korea):
The Financial Services Commission was established in January 2008 for the purpose of centralizing the regulation of South Korea’s financial markets. Its responsibilities include promoting a sound credit system and fair business practices.

Sources and Additional Resources:
“High Interest Charged by Finance Companies Probed” July 24, 2010. http://english.donga.com/srv/service.php3?bicode=020000&biid=2010072421258

MicroCapital Universe: Financial Services Commission: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Financial+Services+Commission+%28FSC%29

Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/

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