South Korea sees surge in small‑business loan delinquencies and tighter debt‑relief fund rules

Delinquent loans held by sole proprietors in South Korea rose to 14.6 trillion won by the end of the first quarter of 2024, driven by stagnant consumer spending, rising labour costs and high interest rates. The increase spans retail, hospitality and service sectors, putting pressure on the domestic financial system and prompting close monitoring by the Financial Services Commission and the Bank of Korea.

In response, authorities have revised the government‑backed “New Start Fund” for debt relief. Effective from 2025, the minimum debt write‑off ceiling was lowered from 60 % to 30 % for borrowers assessed to have repayment capacity, and eligibility now focuses on the most vulnerable firms. The new guidelines also expand asset verification to include virtual assets and non‑listed equities, aiming to curb moral hazard and preserve fiscal resources amid concerns over the nation’s debt‑to‑GDP ratio.