Seoul Livestock National Agricultural Cooperative (NH), the largest unit agricultural cooperative in South Korea, surpassed 5 trillion won in deposits and 4 trillion won in loans for the first time at the end of last year, expanding its scale significantly. However, with the vast majority of lending concentrated in real estate-backed mortgages and the share of unsecured credit loans shrinking, critics say the mega-sized mutual financial institution is neglecting its mission to serve cooperative members and low-income borrowers.
According to the Financial Supervisory Service (FSS) on the 29th, Seoul Livestock NH's total deposits stood at 5.275 trillion won ($3.9 billion) at the end of last year, up 18.7% from 4.4448 trillion won at the end of the previous year. Outstanding loans also grew 11.1% over the same period, from 3.6302 trillion won to 4.0315 trillion won.
Seoul Livestock NH is a mega-sized cooperative with its headquarters and 27 branches in Seoul. Its total assets reached 5.756 trillion won at the end of last year — 11.3 times the average assets of 508.7 billion won across the nation's 1,110 unit agricultural cooperatives. Considering that financial authorities classify savings banks with assets of 5 trillion won or more as large institutions, the cooperative rivals major savings banks in size.
While its external scale has grown, the cooperative's role in serving low-income borrowers has weakened as lending tilts heavily toward real estate collateral. Mortgage loans totaled 3.821 trillion won at the end of last year, accounting for 94.78% of all lending, while the share of unsecured credit loans fell to 1.49%, down from the previous year. By purpose, loans to sole proprietors (44.8%) and household loans (30.6%) made up the bulk, with individual and real estate-related lending dominating.
Loans to non-members were also substantial. Seoul Livestock NH's outstanding loans to non-members reached 1.9674 trillion won at the end of last year, accounting for approximately 48.7% of total lending. Loans to cooperative members stood at just 106.4 billion won, or 2.64% of the total. Critics point out that the institution is straying from its original purpose as a member-centered mutual financial cooperative.
Other unit agricultural cooperatives in the greater Seoul metropolitan area showed similar business patterns. All five Seoul-based agricultural cooperatives that completed their year-end financial disclosures last year saw their mortgage loan share rise and their credit loan share decline. Gyeongseo NH and Seoul Gyeonggi Pig Farming NH each had real estate mortgage ratios reaching 98%. The average share of member loans among Seoul-area cooperatives stood at 7.6% at the end of last year, falling short of the 23.9% national average for unit agricultural cooperatives.
As profitability at unit agricultural cooperatives has deteriorated, some analysts interpret the trend as cooperatives expanding relatively lower-risk mortgage lending while taking a more conservative approach to unsecured credit loans. Net profit from the credit business segment at unit agricultural cooperatives fell 12.3% to 4.604 trillion won at the end of last year from 5.2495 trillion won a year earlier.
"Metropolitan-area cooperatives have few agricultural workers, so the share of cooperative members is low, and loan demand is concentrated in real estate-related financing, leaving them with little choice but to focus on collateralized lending," a financial industry official said.
