Debt by self-employed individuals has been rising at rapid pace over recent years to underscore alarm about the impact from the weakening in the self-employed sector that makes up around a quarter of the working force in Korea.

According to the data submitted by rating agency NICE Information Service to a Democratic Party lawmaker on Sunday, the outstanding loans held by self-employed people at the banking sector stood at 432.21 trillion won ($384.2 billion) as of the end of 2018, up 13.69 percent from 380.15 trillion won in the previous year. The figure soared 44.9 percent over the past three years from 298.11 trillion won in late 2015.

The number of indebted self-employed individuals also rose 9.3 percent to 1.94 million in late 2018 from 1.77 million in late 2017. Among them, the number of debt holders who are late in interest payment by more than 90 days surged 18.9 percent to 27,917 last year from 23,462 in 2017. The delinquent business owners accounted for 1.43 percent of the entire self-employed people, up from 1.32 percent in 2017.

Conditions are worse for small business owners with poor credit ratings. Credit defaulters took up 58.1 percent of self-employed at the lowest 10th credit rating as of the end of 2018, up from 46.4 percent in 2016.

The reality would be graver as the data is simply on business loans extended to the self-employed as more have taken out loans on credit or mortgage to sustain business amid protracted slump and higher labor cost. The nation’s financial authorities said they will keep a close watch on the debt trend of the self-employed businesses.

Self-employed ratio is exceptionally high in Korea as retirees mostly open mom-and-pop stores due to little rehiring opportunities.

By Kim Dong-eun and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]