Delinquency Rate on Loans to Low-Income Self-Employed Hits 10-Year High
The loan delinquency rate for self-employed individuals in the bottom 30% of income earners — the share of loans left unpaid past their due date — stood at 2.13%, the highest since 2015. This indicates that repayment burdens remain heavy for lower-income self-employed workers. According to data obtained by Rep. Park Sung-hoon of the People Power Party from the Bank of Korea on the 24th, the rate has held at the same level as the end of the first quarter of this year for two consecutive quarters.
The record high since statistics began in 2012 was 4.62% at the end of the first quarter of that year. The delinquency rate for self-employed borrowers in the bottom 30% dipped below 1% in 2021–2022, immediately after COVID-19, but rose to 1.15% at the end of the first quarter of 2023 and climbed steadily, surpassing the 2% mark at 2.04% by the end of the first quarter of last year. The rate of increase has accelerated further this year. Outstanding loans to low-income self-employed individuals also hit a record high of 153.9 trillion won.
By income bracket, the delinquency rate was highest among middle-income self-employed individuals earning 30–70% of the distribution, at 3.46%, though this was lower than the second quarter of last year (3.84%) and the first quarter of this year (3.64%). The top 30% of earners saw a rate of 1.58%, up from a year earlier (1.39%) but slightly down from the previous quarter (1.60%).
By age group, those in their 40s and 50s had the highest delinquency rate at 2.15%, followed by those 39 or younger at 1.91% and those 60 or older at 1.78%. Loan balances grew fastest among older borrowers: outstanding loans to self-employed individuals aged 60 and above reached 407.4 trillion won, up 1.7 trillion won from the previous quarter and 19.7 trillion won from a year earlier. By contrast, balances for those 39 and under (99.7 trillion won) and those in their 40s and 50s (591.4 trillion won) declined slightly over the year.
Separate Bank of Korea estimates show that a 0.25-percentage-point rise in lending rates would increase the annual interest burden of self-employed multi-debtors by about 1.1 trillion won, or 670,000 won per person, while a 0.50-point rise would raise the total to 2.2 trillion won, or 1.34 million won per person.
