Kim Eun-kyung, head of the Korea Inclusive Finance Agency (Kinfa), said Monday that the agency will push to launch mid-rate "Financial Ladder Loans" and a "Financial Ladder Bank" (tentative names) designed to help low-credit borrowers gain access to primary financial institutions such as commercial banks.
Kim made the remarks at a press conference marking her 100th day in office, held at Kinfa's headquarters in Jung-gu, Seoul. She said the government's "credit build-up" system needs to be supplemented. The credit build-up framework is a stepwise program in which borrowers who repay illegal private lending prevention loans become eligible for microfinance products, and those who faithfully repay microfinance loans can then enter primary financial institutions through "stepping-stone loans."
Kim argued that Financial Ladder Loans from secondary financial institutions and a Financial Ladder Bank within primary institutions are needed to fill the gaps in the current system. "Over the past three months, there was only one case where a microfinance user successfully moved on to a stepping-stone loan," she said. "There is a steep gap between illegal private lending, microfinance, and primary financial institutions, making it difficult to climb up."
She added, "We have not yet reached the discussion stage with the Financial Services Commission. We will report once the framework is complete."
Kim also stressed the need for financial institutions to contribute funding. "It is ultimately the banks that created a financial system that excludes vulnerable groups," she said. "The funding should come from those who created the systemic risk." She added, "Banks are not the only financial companies. Securities firms also bear some responsibility for the problems of leveraged stock investing and overextended borrowing, so funding sources must be diversified."
On the potential merger of Kinfa and the Credit Counseling and Recovery Service (CCRS), Kim said she "keenly felt the necessity." She described it as "one possible way to arrange the organization more efficiently and streamline the workforce structure." She added, "A frequent counterargument is the conflict of interest between duties, but Kinfa already handles both policy-funded lending and debt restructuring."