November 24, 2024

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Automated teller machines installed at a market in Seoul, March 13 (Yonhap)

Korean banks have rolled out a financial package worth around 600 billion won ($444 million) to support small business owners and young people, with an aim to share their profits, according to the Korea Federation of Banks, an organization representing the lenders, Wednesday.

The funding is a follow-up to a financing plan worth 2.1 trillion won issued in December amid regulatory pressure to share the profits. While 1.5 trillion won was allocated for cash refunds for borrowers' interest payments, the lenders have introduced plans to use the remaining 600 billion won.

Korea’s top four commercial lenders contributed the most to the funding. Hana Bank was the top lender, putting in 156.3 billion won, followed by Shinhan at 109.4 billion won, Woori at 90.8 billion won and KB Kookmin at 71.6 billion won. A total of 12 banks participated in the program.

Of the fund, 221 billion won will be drawn up for the Korea Inclusive Finance Agency, which aims to support the financially underprivileged, while another 15.8 billion won will be allocated to provide loans at relatively lower interest rates.

Some 191.9 billion won will be put into supporting small businesses and their owners, helping them to pay for electricity and telecommunication bills, pay for guarantees and refurbish business places. The measure is expected to help some 420,000 individuals.

Around 168 billion won will be put into supporting youths and financially vulnerable individuals, which is likely to extend help to some 1.25 million individuals here.

Of the 168 billion won, 11.4 billion won will be used to financially support youth-owned businesses, 3.19 billion won for student loans and 1 billion won for education, while 13.2 billion won will be used for housing and providing livelihood stability. Some 8.5 billion won is assigned for tackling the country’s historically low birth rate, such as providing an insurance plan for pregnant women and introducing new financial products to encourage giving birth.

For financially vulnerable individuals, cash funding for interest payment and prevention against voice phishing schemes will be provided.

Policy lenders are to participate in the program as well. The Korea Development Bank and Export-Import Bank of Korea are to inject 83 billion won to provide loans with low-interest rates for SMEs.

Internet-only lender Toss Bank, which was initially excluded from the funding plan, is to roll out a separate program to support borrowers' interest payments.

The measures were autonomously drawn up by the participating banks through two months of discussion, the federation explained.

“The program is to be fully carried out within this year,” the Korea Federation of Banks explained. “The execution result is to be announced through regulatory filings a month after every quarter by each bank for efficiency.”

It expects a total of 1.67 million individuals to benefit from the program, including around 420,000 small-business owners, 260,000 youths and 860,000 financially vulnerable individuals.

By Im Eun-byel (silverstar@heraldcorp.com)
The Korea Herald