Delinquency Rate Nears 10% for Closed Business Owners with Internet Bank Loans
A cumulative total of 40,000 self-employed individuals who took out loans from internet-only banks and then shut down their businesses have been tallied over the past four years. More than six in ten of these closed businesses are concentrated in sectors that first feel an economic downturn—restaurants and cafes in the food and lodging industry, and neighborhood marts and online shopping malls in wholesale and retail trade—raising concerns that loan repayment burdens on ordinary self-employed borrowers are mounting. Another 3,000 went out of business in education and health services, including private academies, tutoring centers, and clinics, while 12,000 more closed operations in manufacturing and other service industries.
The delinquency rate on internet bank loans held by self-employed borrowers who closed their businesses this year stood at 9.5 percent as of late July—meaning roughly one in ten such borrowers faces the risk of defaulting on their financial obligations. By sector, wholesale and retail trade, which carries heavy inventory management and delivery payment burdens, posted the highest rate at 14.8 percent. Other industries recorded 12.4 percent, into double digits, followed by food and lodging at 5.1 percent and education and health services at 3.2 percent.
The surge in business closures stems from internet banks' rapid loan expansion. The balance of internet banks' individual business loans grew from 1.5 trillion won at the end of 2022 to 8.6 trillion won by late July 2026. By type, unsecured credit loans accounted for roughly half at 4.1 trillion won, followed by guaranteed loans at 3.5 trillion won and secured loans at 1 trillion won.
While loan supply has exploded, the relief safety net falls far short. Over the same period, only 1,726 owners of closed businesses—about 4 percent of the total—used debt restructuring. By sector, there were 515 in wholesale and retail trade, 473 in food and lodging, and 654 in other industries, while education and health services saw a mere 84. Internet banks are promoting low-interest, long-term installment repayment through business closure relief refinancing loans and operating debt adjustment programs under the Personal Debtor Protection Act.
Rep. Park Sung-hoon emphasized, "As internet banks' individual business loans have expanded rapidly, the debt burden of self-employed business owners who have closed shop has emerged as an important financial consumer protection issue." He added, "Financial authorities must establish a supervisory framework capable of comprehensively managing not only loan supply expansion but also post-closure delinquency, debt restructuring, and support for business recovery."
