Outstanding loans to South Korea’s small and medium‑sized enterprises (SMEs) and self‑employed borrowers have crossed 1,500 trillion won, roughly $1 trillion, as delinquency rates climb to their highest levels in more than a decade.
Loan totals reveal a stark gap between large firms and smaller players
Data submitted by the Bank of Korea to Rep. Kim Seung‑soo on Sunday show large corporations carrying 297.7 trillion won in loans, with a delinquency rate of 0.22 percent as of the first quarter. By contrast, SMEs hold 1,079.7 trillion won in debt and a delinquency rate of 0.81 percent. Self‑employed borrowers owe 459.6 trillion won, and their delinquency rate sits at 0.71 percent.
Combined, the two groups total 1,539.3 trillion won in outstanding loans. Their delinquency ratios are roughly three to four times higher than those of big firms, raising concerns about rising financial risk in the banking sector.
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Recent trends reverse a decade of improvement
Compared with the first quarter of 2011, corporate lending has more than doubled, while delinquency rates had generally fallen over the past ten years. The latest rise stands out because it occurs in a relatively stable financial environment, unlike the turbulence following the global financial crisis.
Self‑employed borrowers now face a delinquency rate not seen since the first quarter of 2013, and SME rates have hit their highest point since the first quarter of 2016. The increase follows a period of sluggish domestic demand, higher borrowing costs, a weakened won, and supply‑chain disruptions linked to the Middle East conflict earlier this year.
In response, the government announced a 15 trillion‑won package of loans and guarantees for SMEs and mid‑size firms hit by the weak currency and deteriorating business conditions.
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Analysts note that broader structural measures will be needed to narrow the widening financial gap between large corporations and smaller businesses.
The figures show smaller firms remain vulnerable when macroeconomic conditions shift.
Overall, the widening gap in loan performance highlights the need for policies that address both short‑term liquidity and the structural challenges facing Korea’s smaller businesses.
