‘Ultra-ultra-low interest rate’ loans ahead of the election… The Financial Services Commission is “the first story I hear”

Input 2021.04.06 14:54 | Revision 2021.04.06 16:22

Ahead of the re-election on the 7th, there is a lot of controversy over the introduction of the’ultra-low interest rate loan plan’ announced by the Minister of SMEs and Ventures Kwon Chil-seung. This is because the SMEs announced that they would unilaterally promote policies without consultations with relevant departments such as the Financial Services Commission or the Ministry of Strategy and Finance, or concrete policy initiatives. Even within the Democratic Party, a number of officials responded that it was’the beginning of time.

Minister Kwon Chil-seung held a press conference at the government building of Sejong-daero in Seoul on the 1st and announced that he would introduce so-called’ultra-low interest rate’ (tentative name) loans to small business owners. He said it could provide an interest-free loan at all.

Minister Kwon said, “We are looking to reduce the burden on rent, etc., by reviewing ultra-low interest rate (tentative name) loan plans, including interest-free, with a focus on policy financial institutions for small business owners.” However, he added a clue, “It is still a long way. Minister Kwon said, “There are still mixed pros and cons from within,” he said. “I discovered that I have provided loan support at a 0.1% interest rate in the past when a wildfire in Gangwon-do, and I think it will be a good example.”

The first time he unveiled his ultra-low interest rate loan policy was in an interview with KBS radio on the 25th of last month. It was a broadcast conducted by Joo Jin-woo, who ran the podcast’I’m a Trick’ with Kim Eo-jun. At the time, he said, “Even if you can’t get to the interest-free rate, you have to do a deep review of the interest-free loans, seeing that it is not just an ultra-low interest rate, but an ultra-low interest rate loan program.”

Regarding the question,’Are you talking with the banking sector?’, he replied, “I know there was a discussion before I came as the minister in the past.”
All.

However, the Financial Services Commission, which is in charge of financial policy, is in a position that “it is very soon about the ultra-low interest loan program.” Relevant ministries officials said, “There was no inquiries or requests for cooperation from the SMEs,” and “I found out that the SMEs talked about that after receiving an inquiry from (Chosun Biz).”

When introducing a low-interest loan program through a bank window, it is essential to strengthen the credit guarantee fund under the jurisdiction of the Financial Services Commission. However, it does not mean that discussions related to ultra-low-interest loans have been conducted at all.

The Ministry of SMEs said, “There are various methods available for ultra-low interest rate loans,” and said, “A credit guarantee fund is also possible, but direct support through policy funds is one of the methods.” “We will discuss with the Ministry of Information and Technology to reflect this in the additional budget.”

This clarification of the Ministry of SMEs means that it will also seek to provide direct support through funds under the Ministry of SMEs such as the Small Business Corporation. For this to work, a new budget needs to be created. However, this year’s extra budget was passed to the National Assembly on the 25th of last month, when Kwon first unveiled an ultra-low interest rate loan. When the first supplementary budget was just executed, the government department launched a new project assuming the second or third supplementary budget.

Fundraising is one of the ways in which the budget is avoided because the effect of stimulating the economy is not large compared to the size of the budget. In addition, there are many cases in which funds were only raised and the execution of funds was sluggish. It is also pointed out as one of the main culprits of inflating the size of the budget rather than actual fiscal spending. This is the reason why, when the Moon Jae-in administration was organizing an additional budget, government ministries frequently submitted large-scale fundraising and increased plans to the budget authority and were retired. It is for this reason that the explanation that’we will promote ultra-low interest rate loans in the next supplementary administration’ is not realistic.

In addition, it is a situation that has not been discussed properly within the party to the extent that it is said, “This is the first time I hear inside and outside the Democratic Party. There are many ideas from inside and outside the Blue House and the Party, and I see it as one of them”

The general view is that Kwon’s announcement of the’My Way’ style ultra-low interest rate policy shows the current status of the politicians who overdo the unrealistic financial policy for the common people ahead of the election.

Democratic Party candidate Park Young-seon and People’s Power candidate Oh Se-hoon, who will be re-elected by the mayor of Seoul on the 7th, are pledges to provide interest-free loans to small business owners of 50 million to 100 million won, respectively. Interest expenses are covered by the Seoul Credit Guarantee Foundation’s budget.

In the case of Gyeonggi Governor Lee Jae-myung, in the name of the Gyeonggi Credit Guarantee Foundation, he’inquired’ a commercial bank for a basic loan program, saying, “Please review the application of exceptions,” and actually asked for a basic loan, causing controversy. The basic loan pledge made by this branch is to allow anyone to borrow 10 million won per person, regardless of creditworthiness. Interest is deferred indefinitely until the principal is paid.

As of March, the population aged 20 to 64 in Gyeonggi Province (based on the Statistics Korea census) is 9.2 million. If Gyeonggi Province immediately introduces a basic loan business, and all of them borrow money at an ultra-low interest rate of 10 million won, 92 trillion won will be required.

Assuming a 2% annual interest rate (borrower’s burden and Gyeonggi-do support sum), interest expenses alone amount to 1.84 trillion won, a significant amount of which Gyeonggi-do must invest in finances to preserve it. “It is unrealistic to insist that Gyeonggi Province simply asks the bank without a plan to pay the cost” is the reason why it comes from both inside and outside the financial sector.