Kim Yong-beom, chief of the Presidential Policy Office, on Wednesday presented three solutions aimed at reforming a financial system he said works against vulnerable groups: strengthening bank accountability, improving credit evaluation, and redefining the role of micro-finance institutions.
Kim posted on Facebook that day under the title "How to Reconnect a Broken Market: A Design to Reconnect Finance." Referring to two earlier posts in which he had pointed out flaws in the financial system, he said, "I am not advocating for undermining credit order or for irresponsible debt forgiveness." He added, "Rather, the point is to examine how the current order actually functions and which segments are being abandoned."
The first solution Kim proposed to improve financial access for middle- and low-credit borrowers is "changing the structure in which banks believe 'avoidance' is a rational choice." "Avoidance" is interpreted as referring to the problem of banks turning away middle- and low-credit borrowers who have the capacity to repay loans, based on the existing credit rating system. "When finance recoils in fear from that point, what fills the void is illegal private lending and despair," he said. "This framework must change. We must shake up the composition of loans so that household lending is not confined solely to the safe greenhouse of high-credit borrowers."
As a second solution, he proposed that "the outdated framework of credit evaluation must be boldly expanded." "How long will we keep staring only at past delinquency records or credit card histories?" Kim said. "A lack of financial history does not mean a lack of ability to repay." He explained that data such as consumption, bill payments and platform activity serve as "important signals."
Finally, he stressed that "the role of micro-finance must be redefined from the ground up." "Although tax exemptions and support have been generously provided to micro-finance institutions, the reality is a structure in which deposits at central federations are growing faster than loans to members," Kim said, pointing out that "existing micro-finance institutions operate on the basis of 'mutual acquaintance' relationships." He added, "Labor is fluid, income is dispersed and people are scattered," arguing that "what is needed is not simply expanded support but an adjustment of the model."
Kim said, "In the end, all of these proposals converge on one point: reconnecting broken markets and filling neglected ones." He added, "Here, we cannot help but ask about the role of financial authorities. Inclusive finance should not be sought in separate slogans or programs, but in redesigning the financial structure to respond continuously to continuous risks and to reconnect broken segments." He concluded that "this is the starting point for moving beyond an era of cruel finance toward connected finance."
