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A closed shop in the alley of Myeongdong, Seoul. ⓒYonhap News
‘Businesses that small business owners could not repay increased sharply due to the regional credit guarantee fund (Regional Credit Guarantee Fund) assuming the repayment on behalf of them this year.’
On the 23rd, according to the materials submitted by Rep. Yang Bun-nam of the ruling Democratic Party of Korea to the National Assembly’s Administration and Security Committee central review committee, the amount of regional credit guarantee fund substitutions from January to July this year reached 1,445 billion won, an increase of 59.9% compared to the same period last year.
Substitution is when the Regional Credit Guarantee Fund, which guaranteed small business owners to borrow from banks, repays loans that small business owners could not repay.
The amount of substitution increased significantly from 4,303 billion won in 2021 to 5,076 billion won in 2022, and then to 17,126 billion won.
The number of substitutions from January to July reached 98,000, an increase of 69.3% from the same period last year.
According to the Bank of Korea, as of the end of last month, the outstanding balance of loans to individual business owners (self-employed) by banks stood at 455.7 trillion won, an increase of 125.8 trillion won (38.1%) compared to 329.9 trillion won at the end of August 2019 before COVID-19.
The number of small businesses closing down has also continued to increase after COVID-19.
The yellow umbrella closure subsidy paid from January to July this year amounted to 8,881 billion won, an increase of 12.4% from last year.
The Yellow Umbrella is a public subsidy system for the livelihood stability and retirement security of small business owners.
The yellow umbrella closure subsidy has increased every year from 6,142 billion won in 2019 to 7,283 billion won in 2020, 9,040 billion won in 2021, and 9,682 billion won in 2022, exceeding 1 trillion won for the first time last year (1.26 trillion won).
Rep. Yang Bun-nam said, “The difficulties faced by small business owners further depress the economy and have a negative impact on the local economy,” adding, “The government should consider bold fiscal investment and other policy measures.”
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