MICROLOAN FOR LOW-INCOME EARNERS

[Anchor Lead]

A microfinance product has been introduced that lends up to one million won for those who urgently need living expenses, even for those with no income or with a history of default. This loan is designed for the socially vulnerable who have no access to borrowing from financial institutions and have to resort to high-interest illegal loans. We look into what the interest rate looks like, and who is eligible to apply for the loan.

[Pkg]

This man in his 40s fell victim to fraud and ended up with a debt amounting to 150 million won. As a public service worker, he makes only around one million won a month. Health care costs are a major concern should he need medical help.

[Soundbite] (Public service worker) : "I am tempted to get a loan from illegal lenders despite their high interest rates."

Microloans of up to one million won will be provided from March 27 to the socially vulnerable, who easily fall victim to loan sharks. Eligibility includes personal credit rating within the bottom 20 percent and annual income of under 35 million won. Those with a loan delinquency record or no income at all are also eligible. The initial loan amount is 500,000 won. When more money is needed to pay medical bills or for other urgent purposes, the loan can be expanded up to one million won. The recipients of microloans will be required to pay only the interest before repaying the entire sum one year later. They can suspend loan payment for up to five years. The annual interest rate is 15.9 percent, or 13,000 won a month for a one-million-won loan. Those who attend online financial courses get a point-five-percentage-point discount, and those who pay their interest on time during the year are eligible for a six-percentage-point cut. That's just 7800 won in monthly interest. The Financial Services Commission said it took into consideration fairness in relation to other microfinance products, as many point out that interest rates on loans are excessively high these days.

[Soundbite] Jeong Seon-in(Financial Services Commission) : "The interest rate on other microfinance loans for people with high credit rating is 15.9 percent. We wanted to ensure fairness."

Those who want to receive the microloan should book it in advance and visit one of the 46 low-income comprehensive support centers nationwide from next Monday. Consultations are available from Wed. online or by phone.