Unit Nonghyup to Halt Household Loans to Non-Members Starting March 10

Unit-level branches of the National Agricultural Cooperative Federation (Nonghyup) will effectively suspend household loans to non-members and associate members. Following Saemaul Geumgo (community credit cooperatives), which failed to receive household loan growth targets this year, Nonghyup is now also shutting its lending doors, intensifying the government's crackdown on household lending. According to financial industry sources on March 7, Nonghyup's central body recently issued a directive requiring unit-level cooperatives whose household loan growth exceeds 1% year-on-year to suspend household lending to non-members and associate members. The measure takes effect on March 10. According to Nonghyup's central body, full members are defined as those engaged in agriculture or livestock farming. Residents living within a unit cooperative's service area who contribute a certain amount of equity can qualify as associate members. Non-members refer to general customers who do not reside within the cooperative's service area. Currently, unit-level Nonghyup branches are each allowed to lend up to 30% of their loan portfolios to associate members and non-members respectively. Banning loans to these groups would effectively block a significant portion of household lending. Last year, unit-level Nonghyup branches actively extended mortgage loans based on relatively competitive interest rates. As the measure takes effect immediately on March 10, borrowers with funding needs must effectively complete their loan applications by March 9. Previously, unit-level Nonghyup branches suspended household loan applications through brokers starting March 3 and decided to stop handling interim payment and relocation expense loans from March 9. Nonghyup's central body is understood to have taken the measure as a preemptive step to block the "balloon effect," in which loan demand shifts to less regulated channels after tighter regulations are imposed on the banking sector. According to the Financial Supervisory Service, bank household loans fell by 300 billion won in February, but mutual finance institutions saw an increase of 3.1 trillion won. Household loans at unit-level Nonghyup branches nationwide rose by 3.2 trillion won in January and February this year. That is a significant surge compared to the total increase of 3.6 trillion won for all of last year. Saemaul Geumgo similarly saw household loans grow by 5.3 trillion won last year, and this year, loans surged by 1.8 trillion won in just two months. Industry observers predict that a "loan shutdown" across the entire mutual finance sector is becoming a reality. The Financial Services Commission (FSC) has set this year's total household loan growth cap at 1.5%. That is lower than last year's figure of 1.7% and less than half of this year's projected nominal growth rate of 4.9%. There are concerns that tightening lending even at mutual finance institutions — a key borrowing channel for ordinary citizens — could create a severe "loan cliff." "Group loans surged due to seasonal factors such as relocation demand at the start of the school year, and now volume caps have been imposed on top of that," a financial industry official said. "For the time being, loan origination will likely shrink significantly, especially in the mutual finance sector, greatly increasing the risk of a loan cliff." Another financial industry official stressed, "It feels as though the government is putting financial policy at the forefront to stabilize real estate prices. Demand management can buy time, but it cannot solve the real estate problem."

Unit Nonghyup to Halt Household Loans to Non-Members Starting March 10

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