Seoul, South Korea – The number of self-employed South Koreans struggling to repay their loans has surged by over 40% in the past year, driven by high-interest rates and sluggish consumer spending. With political uncertainty looming large and the economy expected to remain sluggish in the new year, the situation for these small business owners is projected to worsen.

According to data from NICE Information Service, a major credit rating agency, a total of 3.369 million self-employed individuals held ₩1,123.8 trillion in loans from financial institutions as of the end of the third quarter last year. This marks a record high, surpassing the ₩1,120 trillion threshold for the first time.

Rising Delinquencies

Of particular concern is the sharp increase in the number of borrowers who have fallen behind on their loan payments. The number of delinquent borrowers jumped 41.8% year-on-year to 146,000, with their outstanding debt climbing by 37.5% to ₩29.7 trillion. This indicates that approximately ₩30 trillion in loans from self-employed individuals are now at risk of default.

Multi-Debt Burden

The situation is further compounded by the growing number of self-employed individuals carrying multiple debts. As of the end of the third quarter last year, over half (51.1%) of all self-employed borrowers, or 1.72 million people, were classified as multi-debtors. These individuals held a combined debt of ₩689.6 trillion, accounting for 61.4% of the total debt owed by self-employed individuals.

Moreover, the number of delinquent multi-debtors increased by 29.3% to 97,000, with their outstanding debt rising by 29.8% to ₩23.5 trillion over the same period.

Central Bank's Concerns

The Bank of Korea has also expressed concerns about the rising debt levels among self-employed individuals. According to the central bank's data, the delinquency rate for multi-debtor self-employed individuals reached 2.03% at the end of the third quarter last year, the highest level since the first quarter of 2014.

Bank of Korea Governor Lee Chang-yong has called for targeted fiscal support to help struggling small businesses. "When we give money to ordinary people, they will order from online stores and restaurants that are already doing well," Governor Lee said. "Fiscal spending should be targeted at struggling small businesses."