Nearly half of the unsecured loans extended by Korea's mutual finance sector, including the National Agricultural Cooperative Federation (Nonghyup) and credit unions, have gone to high-credit borrowers with credit scores of 900 or above, data showed. This runs counter to the sector's founding principle of returning benefits to members based on a spirit of mutual aid.
According to NICE Information Service on Sunday, borrowers with credit scores of 900 or higher accounted for 46.5% of credit-based loans — including unsecured loans and long-term card loans, excluding policy microfinance loans — at mutual finance institutions as of the end of March. Borrowers in the 800-point range made up another 34.2%.
By contrast, mid- and low-credit borrowers in the 700-point range and those at 600 or below accounted for only 10.0% and 9.3%, respectively. The distribution is virtually identical to that of commercial banks. At banks, 54.5% of credit loan borrowers had scores of 900 or above, while the 700-point and sub-600 ranges accounted for 9.9% and 7.3%, respectively.
The concentration of high-credit borrowers at mutual finance institutions stands out when compared with other non-bank financial institutions. At savings banks, borrowers in the 700-point range made up the largest share at 49.1%, followed by those at 600 or below at 37.4%. At capital firms, 700-point borrowers also formed the largest group at 44.3%, with sub-600 borrowers at 40.0%. Those in the 800-point range accounted for 15.6%, and the 900-point range was just 0.1%.
The credit card industry followed a similar pattern, with the 700-point range at 37.3%, the 800-point range at 35.6%, sub-600 at 22.6%, and 900 or above at 4.5%. While borrowers with scores of 700 or below generally exceeded 80% at non-bank financial institutions, that share fell short of 20% at mutual finance institutions.
This context underpins the pointed criticism from Kim Yong-beom, chief of the Presidential Office's policy planning, who said of the mutual finance sector: "We have spared no tax exemptions or support, yet deposits at the central federation have grown more than loans to members. Their role must be redefined from the ground up." Mutual finance institutions were established to supply funds to ordinary citizens and vulnerable groups through community-based relationship banking.
Inside the sector, concerns are mounting, and institutions are rethinking their business strategies. "Mutual finance, which operates based on local communities and groups, has higher similarity among members than other financial firms," an official in the mutual finance sector said. "We are considering applying specialized credit evaluation models tailored to each cooperative."
