Small Business Owners Breathe a Sigh of Relief: 1.445 Trillion Won in Debt Paid Off on Their Behalf
Sharp Increase in Subrogation Payments for Small Business Owners
Total of subrogation payments up to July this year
↑59.9% compared to the same period in 2023
As of the end of July, the amount of bank debt repaid by local credit guarantee foundations on behalf of small business owners has reached approximately 1.4 trillion won.
According to data received by Yang Bu-nam, a member of the National Assembly’s Public Administration and Security Committee and a member of the Democratic Party of Korea, from the Korea Credit Guarantee Fund, the amount of local credit default payments from January to July of this year was tallied at 1.445 trillion won. This represents a 59.9% increase from the same period last year.
Subrogation refers to a local credit union paying off a bank debt that a small business owner cannot repay. The amount of subrogation has been increasing steadily, from KRW 430.3 billion in 2021 to KRW 507.6 billion in 2022, and then jumping more than threefold to KRW 1.7126 trillion last year.
The number of subrogation cases has also increased significantly, by 69.3% year-on-year to 98,186 cases from January to July this year. This represents a substantial rise from 22,000 cases in 2021 to 31,000 cases in 2022, and then surging to 112,000 cases last year.
By city, the city with the largest increase in subrogation amount compared to the same period last year as of the end of July this year was Sejong City, with an increase of over 400% (KRW 1.8 billion → KRW 7.4 billion). This was followed by Gangwon with 220% (KRW 25.6 billion → KRW 56.7 billion), Chungbuk with 94.8% (KRW 17.5 billion → KRW 34.1 billion), Gyeonggi with 94.6% (KRW 166.7 billion → KRW 324.5 billion), Busan with 77.1% (KRW 62.6 billion → KRW 110.9 billion), Incheon with 74% (KRW 54.8 billion → KRW 95.4 billion), and Gwangju with 72.5% (KRW 21.1 billion → KRW 36.4 billion).
The prolonged economic downturn, characterized by high interest rates, high prices, and high exchange rates, has led to a sharp increase in the scale of subrogation. Small business owners are struggling to cope with the economic downturn, which has been exacerbated by the novel coronavirus infection.
Rep. Yang emphasized, “The difficulties of small business owners are further slowing down the economy and having a negative impact on the local economy. The government should consider policy measures such as bold fiscal investment.”
Reporter Chae Myeong-jun