While many first-time visitors remark how robust the Korean consumer economy appears to be doing compared to many other markets, we need to recognize there are many Koreans who are either struggling to make ends meet or are being driven by a psychological need for ‘keeping up with the Kims.’
When it comes to the latter, not all of the extra spending is for conspicuous consumption. Much of the outflow that exceeds the normal income levels goes into spending for the children’s education, which in reality is the ultimate investment in the family’s long-term social status – a gigantic consideration in the world’s most Confucian society.
2 out of 10 S Koreans Have ‘Dangerously Low Credit Levels’
by Moon-hak Hyun – Su-hyun Song / edited by Soyoung Chung
Maeil Business Newspaper
April 14, 2011
Two out of 10 South Korean borrowers fall into the category of low credit ratings, the levels that could impose difficulties on financial transactions.
Although the number of Korean borrowers with low credit ratings is showing signs of decreasing, the proportion of people living with debts is still significantly high, mounting greater pressures in
accordance with hikes in interest rates.
According to credit rating agency Nice Information Service and the financial sector on Thursday, 18.6% (7.27 million) of 39.13 million people who are granted with credit ratings were rated below grade seven as of late last year.
Among them, 3.56 million (9.11%) were rated grade seven in which their credit levels are ‘quite low,’ but they can maintain existing transactions at least, while 2.14 million (5.48%) were rated grade eight where their credit levels are ‘very low’ and some of them are already going bankrupt.
The number of people who fall into the lowest category, grade nine and 10 with ‘dangerously low’ credit levels, posted 981,825 (2.51%) and 588,092, respectively.
The aggregate proportion of loans held by those in grade nine and 10 recorded 84%, doubling the average 42.01% across all grades, according to the Korea Federation of Banks (KFB)’ data on possession of loans including transactions with savings banks, credit card use and bank loan issuances.
Within grade nine and 10, 84.09% (825,655 persons) and 84.24% (495,421 persons) are holding loans to pay back as of now.