Inclusive finance policies are aimed at providing financial support to the most vulnerable and marginalized groups to help them gain new opportunities and get back on their feet, thereby creating a virtuous cycle between financial inclusion and economic growth. A variety of government-sponsored microloan products are available for low-income individuals and those with unfavorable credit records. In addition, debt adjustment programs are available for delinquent debtors, offering an extended payment period, amortization, interest rate reduction and debt reduction. Consumer protection is a key area of inclusive finance policies. In this regard, the new legislation on financial consumer protection passed at the National Assembly in March 2020 aims to protect consumers from misselling and other unfair sales practices of financial companies while strengthening consumer rights and empowering consumers to make informed decisions about their investment and asset management.
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Jun 23, 2015
- Plan to Strengthen Microfinance Support
- The FSC announced its plan to strengthen microfinance programs to reduce financial burden of low-income borrowers and to support their self-sufficiency. BACKGROUNDThe government has been driving policy efforts to reduce financial burden of low-income borrowers and enhance their access to financial services through various microfinance programs. The Happiness Fund, launched in March 2013, purchased delinquent loans of 2.8 million low-income borrowers to reduce their debt repayment burden and supported debt-restructuring of 410,000 borrowers as of May 2015. Four major government-backed microloans have also provided a total of KRW 11 trillion to more than 1.1 million low-income borrowers since 2013. In order to expand microfinance support in a sustainable way, the FSC came up with its plan focused on increasing the amount of policy microloans, while reducing debt servicing burden of low-income borrowers. Policy incentives will be also devised to give more benefits to those who faithfully repay their debt. Microfinance policy will be pushed forward to support the self-sufficiency of low-income families and individuals through comprehensive assistance for debt restructuring, job seeking and micro-savings. KEY POLICY TASKS1. Expand provision of policy loans, while reducing financial burden for low-income borrowers The provision of government-backed microloans will be expanded from the current KRW 4.5 trillion to KRW 5.7 trillion per year, which will increase the number of beneficiaries from the current 470,000 to 600,000 per year. To reduce debt servicing burden of low-income borrowers, the ceilings of government-backed micro-lending will be cut by up to 1.5%p starting from August 2015. The FSC will lower the statutory ceiling on lending by non-banking institutions from the current 34.9% to 29.9% through revisions to the Credit Business Act. 2. Provide more incentives for policy loan borrowers who faithfully repay their debt Out of borrowers of government-backed microloan
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Mar 28, 2014
- One-Year Achievements of the Happiness Fund
- KEY ACHIEVEMENTSAs of March 2014, the Happiness Fund has supported debt restructuring of 249,000 debtors, out of a total of 294,000 applicants since its launch on March 29, 2013. For the last one year, the Happiness Fund has reached out to 294,000 debtors, 3.8 times more than the initially targeted number of 65,000 a year.Out of the 249,000 debtors, the Happiness Fund purchased debts of 168,000 borrowers from financial institutions since its launch. Debts of the remaining 81,000 were taken over from public asset management companies (AMCs).The 168,000 debtors were written off 51.8% of their debts, KRW0.9 trillion out of a total of KRW1.8 trillion (principal only), which is equivalent to write-offs of KRW5.73 million per person.The Happiness Fund helped those in debt restructuring program find jobs so that they could repay their debts on their own.From April 1 last year to March 24 this year, a total of 48,000 borrowers switch their high-interest loans to lower-interest ones with 10% or higher, which lowered their burden of interest payments by KRW 8.93 million.FUTURE PLANThe Happiness Fund plans to purchase student loans with the passage of the Korea Student Aid Foundation (KOSAF) Act, now pending in the National Assembly.The FSC will also make effort to launch an integrated system as soon as possible to manage and coordinate microfinance programs.* Pleaserefer tothe attachedPDF for details.
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Oct 16, 2013
- Progress Report on National Happpiness Fund
- ACHIEVEMENT1. Debt restructuringSince the National Happiness Fund was officially launched in March 29, 2013, a total of 192 thousand individuals have applied for the debt restructuring from April 22 to October 10. Out of the applicants, 160 thousand individuals have had their debt restructured under the program. At the current pace of 1,300 applicants per day, a total of 210 thousand individuals are expected to apply for the debt restructuring until the end of October when the application is due. Under the program, overdue debt of more than 2.84 million individuals was acquired or transferred from lenders and public asset management companies (AMCs).2. Debt converted to low-interest loansFrom April 1 to September 30, a total of 350 thousand debtors had their high-interest loans worth KRW 378.7 billion converted to lower-interest loans.EVALUATIONThe number of beneficiaries far exceeds the initial estimation at the time the National Happiness Fund was launched. In six months since its launch in March, the Fund has already assisted 180 thousand debtors, more than half of the initially estimated number of 326 thousand individuals that the program would reach over five years.The National Happiness Fund outperformed similar programs by public AMCs in terms of the number of debt restructuring beneficiaries and the amount of purchased overdue debt.There were some concerns that the program might cause moral hazard among debtors; however, the problem of moral hazard has not been so serious as initially concerned as most of beneficiaries are found to be low-income borrowers struggling with debt overdue for long time.The government will continue to make efforts to help as many debtors as possible pay back their debt by closely working with relevant ministries and institutions.*Please read the attached file for details.
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Aug 06, 2013
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May 10, 2013
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Mar 25, 2013
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Jul 04, 2012
- New Scheme for Credit Card Merchant Fees
- BACKGROUNDMerchant fees on credit card transactions have been charged based on a sector-basis since the merchant fee scheme was first introduced in 1978. However, the sector-based fee scheme has been under criticism that the criterion is unclear and unreasonable. With the widening gap in merchant fees between large retailers and small merchants, it has been continuously argued whether the fee scheme is fair and appropriate.In an effort to overhaul the fee structure, the FSC made revision to the Credit Finance Business Act in March 2012, providing the legal grounds for revising the credit card merchant fee scheme for the first time since 1978.NEW SCHEME FOR CHARGING MERCHANT FEESSince then, a task force made up of market participants and the academia came up with the following new scheme.Credit card companies shall charge reasonable fee rates to each individual merchant, following the basic principles and standards proposed by the FSC.Large retailers1 are prohibited from asking credit card companies unfairly low fee rates, taking advantage of their dominant power. They are also forbidden from asking any kind of compensation in return for paying merchant fees to credit card companies.For small merchants with annual revenue of up to KRW 200 million, the preferential fee rate of 1.5% will be charged, compared with the current rate of 1.8%.EXPECTED OUTCOMESAs the sector-based merchant fee scheme is changed to an individual merchant-based fee schemes, we expect merchant fees will be charged in a fair and reasonable manner.Under the new rules, 96% out of 2.2 million merchants in total will be charged lower fee rates. The gap in merchant fees between large and small merchants will be reduced from the current 3%p to 1%p.As fee rates charged to small merchants are significantly cut, 68% out of 2.2 million merchants will benefit from lower rates.Card companies will refrain from excessively issuing credit cards and expanding businesses.UPCOMING SCHEDULE- Legislative notice of r
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Apr 02, 2012
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Mar 28, 2012
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Apr 18, 2011
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Feb 17, 2011
- Actions Taken for Mutual Savings Banks
- The Financial Services Commission (FSC) held a provisional meeting today and decided to impose 6-month business suspensions for Busan Savings Bank and Daejeon Savings Bank.Busan Savings Bank is affiliated with four other banks: Busan Central Savings Bank; Busan 2 Savings Bank; Daejeon Savings Bank; and Jeonju Savings Bank.Following the outbreak of the financial crisis in 2008 and subsequent real estate recession, financial health of the five savings banks has deteriorated, and as of end-December 2010, Busan Savings Bank’s BIS ratio has fallen to 5.13% while the outstanding liabilities surpass total assets by KRW 21.6 billion resulting in negative equity. Daejeon Savings Bank’s current BIS ratio is -3.18% and its liabilities surpass its assets by KRW 32.3 billion.Daejeon Savings Bank has experienced continued withdrawals of its deposits since D cember2010 and after judging that it is no longer able to payout anymore deposits, it has submitted a formal request for a business suspension to the FSC on February 16, 2011.The FSS plans to start a full investigation today on the suspended savings banks, and actions will be taken to normalize their operations.According to the Act on the Structural Improvement of the Financial Industry, following actions are to be taken for mutual savings banks that failed to meet the 5% BIS requirement.- Below 5% - Business Improvement Recommendation- Below 3% - Business Improvement Request- Below 1% - Business Improvement OrderAside from the two suspended banks, there are five other savings banks that fall short of the 5% BIS requirement: Bohae Savings Bank; Domin Savings Bank; Woori Savings Bank; Saenuri Savings Bank; and Yes Savings Bank, of which three of them: Woori and Saenuri (state-owned) and Yes (held by KDIC) have no difficulties financially. The other two: Bohae and Domin have submitted their business normalization plans and they are making progress. Out of 104 mutual savings banks in operation, apart from the five affiliated
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Dec 20, 2010
- Proposals to Stimulate Corporate Pension Plans
- BackgroundCorporate pension plans are one of the important financial schemes to help retirees lead a financially stable life after retirement. In order to prepare for the rapidly aging population and supplement insufficient public pension plans, it is necessary to stimulate corporate pension services in Korea. In fact, the development of Korea’s corporate pension system remains lukewarm as corporate sponsors still run a severance pay system in parallel with pension plans and they feel the burden of making contributions to a pension fund managed outside the company.The Financial Services Commission (FSC) and the Ministry of Employment and Labor (MOEL) have come up with the following proposals to reform corporate pension plans, based upon what we have discussed at a T/F, which was created on May 28, 2010 as a public-private partnership with the FSS, the industry and the academia to invigorate pension services and encourage fair competition in the market.Major Reform Plans1. Easing regulations on corporate pension fund managementFor Defined Contribution (DC) plans and Individual Retirement Accounts (IRAs), the government will revise related regulations to allow up to 40% of the pension funds to be invested in collective investment securities such as equity-type funds or hybrid funds.**Under current regulations, DC plans and IRAs are forbidden to invest in equity-type or hybrid funds.However, we have decided to continue to prohibit direct investment in equities, considering employees’ limited financial knowledge and asset management capability, and to ensure that pension assets are managed safely.For Defined Benefit (DB) plans, we will keep the current rules of investment ratio (30% for equities, 50% for equity-type or hybrid funds) as the current caps of risk asset investment are sufficient enough to ensure the safe management of the pension funds.With the revision of related regulations, we expect to give pension subscribers a broader range of choices and reflect
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Jul 20, 2010
- "Sunshine Loans" for Low-Income Households
- 1. BackgroundIn the wake of global financial crisis, low-income households have become more in need of loans; however, loans for them have become less available as financial institutions for low- income households have been more concentrated on equity investment and project financing. As a result, low-income households have been increasingly relying on private lenders and credit business providers, thus facing the burden of paying higher interests.Moreover, as the Bank of Korea (BOK) recently raised the base interest rate, if it leads to arise in market interest rates, low-income household would bear higher burden of inter st payment.(1) Starting from the end of July, approximately KRW 10 trillion will be extended over the next five years through the “Sunshine Loan” program by financial institutions* for low- income households.*The National Agricultural Cooperative Federation, the National Federation of Fisheries Cooperatives, the National Credit Union Federation of Korea, the Korean Federation of Community Credit Cooperatives, and mutual savings banks(2) The loans will be extended to individuals whose credit rating ranges from level 6 to level 10 or small business owners whose annual income is less than KRW 20 million.(3) Interest rates will be set by each financial institution but with a ceiling* in place.*As of July 20, the interest rate ceiling is 10.6% for financial cooperatives, 13.1 % for mutual savings banks. The ceiling may be adjusted depending on changes in funding costs of one-year maturity term deposits.(4) The Sunshine loan program aims to help low-income households start up business (up to KRW 50 million), provide operating capital for business (up to KRW 20 million), or support urgently needed living expenses (up to KRW 10 million).(5) Assuming that each individual makes a KRW 10 million loan, one million people are expected to benefit from the Sunshine loan program over the next five years. The Sunshine loan program will reduce the low-income ho
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Apr 15, 2010
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Sep 17, 2009
- Expanded Microcredit for Low-Income Households
- Following the 31st Emergency Economic Meeting, the government revealed its “Miso Credit Foundation” (previously named the Microfinance Foundation) plan to provide extensive support in microcredit loans to low-income households, which will be enforced in December.The Foundation is expected to provide KRW 2 trillion over the next 10 years, in excess of 13 times the previous amount over the last 10 years, made possible through contributions from the private sector exercising their corporate social responsibility.The Miso Credit Foundation plans to open 20 to 30 branches at the first stage and expand up to 300 nationwide branches to carry out operation in order to maximize accessibility. The branches will be independently incorporated and operated, receiving operational guidelines, consulting and education from the main office.The branches will be staffed mostly by volunteers, including the branch managers, which will be non-paid positions given to ex-financiers and retirees. The regular employees will be paid less than KRW 1 million a month, and student volunteers will be paid a minimum for their daily allowances. The funding support structure for the branches will be flexible and determined according to the regular examination of their performances.In terms of funding the Foundation, the member corporations of the Federation of Korean Industries have committed to donating up to KRW 1 trillion over the next 10 years. The other KRW 1 trillion will be contributed by financial institutions, including the KRW 700 billion withdrawn from dormant accounts currently managed by the Microfinance Foundation, KRW 200 billion initially and KRW 50 billion annually over the next 10 years.The target beneficiaries will include petty business owners, traditional market business owners, viable startup franchise store owners, regular startup businesses, startup partnership businesses, and verified non-profit organizations.The interest rates will be set below the prime rate, currently
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Apr 08, 2009
- Pre-Workout Program
- The Credit Counseling and Recovery Service (CCRS) is a nonprofit corporation aiming to support debtors in financial difficulties and regulated by the Financial Services Commission.Starting on April 13 for a limited duration of one year, the CCRS and creditor institutions will run a “Pre-Workout Program” in support of individual borrowers who are delinquent for a short term between one and three months. This plan was first announced in March 10 this year.The main objective of this initiative is to take preemptive steps against further increase in as well as protraction of household delinquents, posing a threat to hurt asset soundness of creditor financial institutions.To be qualified for the program, there are six criteria which applicants must satisfy, and they include the total debt amount limit by two creditors (under KRW 500 million), delinquency length (between 30 and 90 days), and the ratio of new credit to total existing debts (30% maximum), among others.Meanwhile, to prevent credit delinquents from taking advantage of this program by intentionally putting off repayments, the CCRS and financial institutions will soon unveil additional provisions.For further details, interested users can call (1600-5500) or email CCRC (www.ccrs.or.kr) directly.* Please refer to the attached PDF for details.
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Feb 18, 2009
