Regional Banks Offer Low-Interest Loans to Foreign Workers in South Korea

Regional banks in South Korea are increasingly offering low-interest loans to foreign workers, particularly those from non-Korean countries with limited credit history in the country. These loans are aimed at addressing the financial needs of foreign workers who have limited access to financial services due to their thin credit files. According to market watchers, the low-interest loans are a much-needed product for foreign workers who often face high borrowing costs in their home countries. Jeonbuk Bank, a regional lender in South Korea, has been at the forefront of this trend, offering credit loans specifically for foreigners with interest rates as low as 13 percent. This is significantly lower than the high-interest rates that foreign workers often face in their home countries, where rates can range between 20 to 40 percent.

Key Takeaways:

• Jeonbuk Bank is the first commercial lender in Korea to introduce credit loans for foreigners, with the first loan being introduced in 2016.
• The bank offers foreigner-only credit loans with an interest rate of 13 percent, which is significantly lower than the high-interest rates offered in their home countries.
• The workers' income histories in Korea can be referenced for credit ratings, making it easier for foreign workers to secure loans.
• As of last year, more than 300,000 foreign workers are staying in Korea on E-9 visas, many of whom are taking out high-interest loans from brokers in their home countries.
• The delinquency rate on foreign workers' loans is around 2 percent, indicating that most borrowers are able to pay interest on time due to the support of their families back home.
• BNK Busan Bank and BNK Kyongnam Bank are also providing tailored financial services for foreign exchange students and workers in Ulsan and Changwon.
• Kwangju Bank is seeking to establish a center dedicated to the needs of foreign workers, further indicating the growing recognition of the financial needs of this sector.

Statistics:

• The current delinquency rate on foreign workers' loans is around 2 percent.
• The foreign credit loans provided by Jeonbuk Bank stood at about 470 billion won as of March, accounting for 72 percent of the market share total.
• More than 300,000 foreign workers are staying in Korea on E-9 visas, with many of them taking out high-interest loans from brokers in their home countries.

Sources:

• Lee, J. (2023). Korean regional banks offer low-interest loans to foreign workers. The Korea Times.
• Chosun Biz. (2023). Regional Banks Lead Foreign Exchange Market. Chosun Biz.
• The Korea Economic Daily. (2023). Foreign workers borrow KRW 470 billion in loans from Jeonbuk Bank. The Korea Economic Daily.