Korea's bank loans to the self-employed rose at the fastest clip ever in 2015 as they relied more on debt amid a protracted slump in domestic demand, data showed in the endof February 2016. Outstanding loans to the self-employed by five major local lenders, including Shinhan Bank and Kookmin Bank, came to 164.17 trillion won ($133.1 billion) in 2015, up 16.1 percent, or 22.7 trillion won, from a year ago, according to the data compiled by Statistics Korea and the banks. The annual gain compares with the previous on-year growth record of 13.6 trillion won posted in 2014. But the number of self-employed people fell 89,000 on-year to 5.56 million as of the end of last year, which marked the lowest level since 1994, they noted.
"Baby boomers and young people have rushed to set up their own businesses amid tough job market conditions, leading to fierce competition among shops," said Lee Geun-tae, an expert at the LG Economics Research Institute. "Under these circumstances, the entrepreneurs appear to have resorted to banks for loans to use for more investments, as well as to use for their living expenses, while struggling with dwindling income," he added. According to the Organization for Economic Cooperation and Development (OECD), South Korea ranked fourth in terms of the proportion of the self-employed among the OECD's 31 member nations with 27.4 percent, trailing Greece with 36.9 percent, Turkey with 35.9 percent and Mexico with 33 percent. The mounting debt by the self-employed added to concerns over the country's bulky household debt amid the protracted economic slowdown.
Household credit climbed to a new high in the fourth quarter of 2015 to reach 1,207.0 trillion won, breaching the 1,200 trillion-won mark for the first time in the country's history, according to the preliminary data from the Bank of Korea. "With this bulky household debt, it is hard to expect consumption will revive anytime soon," said Kim Wan-jung, a researcher at the Hana Institute of Finance. "It is urgent to come up with measures to boost household income to stimulate consumption, which would help bring self-employed people back."