Corporate lending in the Seoul metropolitan area has reached a record high, while lending in the rest of South Korea remained largely flat. According to data from the Bank of Korea, outstanding corporate loans at domestic deposit-taking banks totaled 1,487.41 trillion won ($1.01 trillion) as of the end of May.
Loans extended through bank branches in the Seoul metropolitan area reached 1,005.6 trillion won, surpassing the 1,000 trillion won mark for the first time. The total exceeded 800 trillion won in 2022 and 900 trillion won in 2024 before topping 1,000 trillion won about two years later.
Outstanding corporate loans through branches outside the capital region stood at 481.84 trillion won. The figure has remained below 500 trillion won since first exceeding 400 trillion won in 2021, showing little growth over the past four and a half years.
The capital region’s share of total corporate lending climbed to a record 67.6 percent in May. More than three-quarters of bank corporate loans go to small and medium-sized enterprises, which rely heavily on bank financing because they have fewer alternatives, such as issuing corporate bonds.
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Under the Lee Jae-myung administration’s balanced regional development agenda, financial authorities have introduced measures to channel more funding outside the capital. They plan to raise the share of policy lending directed to regional economies to 45 percent by 2028 from about 40 percent currently, while easing loan-to-deposit ratio rules for commercial banks’ lending to regional SMEs.
However, these measures have yet to gain traction. Over the past year, corporate lending in the capital region rose 5.9 percent compared with a 2.4 percent increase outside the capital. So far this year, lending has grown 3.8 percent in the Seoul area, more than double the 1.8 percent pace in other regions.
Korea’s economy grew 3.8 percent from a year earlier in the first quarter. The capital region expanded 5.2 percent, compared with 2.3 percent in the Daegu-North Gyeongsang region and 2 percent in the southeastern region.
They are preparing additional measures, including a 1 trillion won preferential guarantee program for strategic regional industries in the second half of the year. They also plan to introduce joint lending by regional and internet-only banks to help regional SMEs access lower-cost financing.
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For regional businesses, particularly small and medium-sized enterprises, the lack of access to credit can be a significant challenge. As they continue to implement measures to boost regional funding, these businesses will remain a key focus. The sector is a significant part of the Korean economy, and addressing the regional lending disparity will be essential to supporting its growth.
According to an official from the banking industry, “Banks were trying to expand lending outside the capital in line with the government’s policy, but weak regional economies were limiting demand.”
The government’s efforts to address the regional lending disparity are ongoing. For now, the record high in corporate lending in the Seoul metropolitan area highlights the ongoing challenges in achieving balanced regional development.
Regional lending remains a concern.
