[비즈한국] Amid an economic slowdown where annual economic growth is expected to hover around 1%, loan delinquency rates are surging, particularly among the self-employed and small and medium-sized enterprises (SMEs). Delinquency rates for SMEs and self-employed individuals struggling to repay their debts have reached their highest level in nine years.
Furthermore, the reliance on borrowed funds—money owed to banks and other institutions—among SMEs has climbed to its highest level in a decade. While the number of SMEs and self-employed individuals taking out loans has increased due to economic hardship, they are failing to make timely interest payments as a result of persistent sluggish sales.
On the 4th, President Lee Jae-myung delivered a policy speech at the National Assembly regarding the 728 trillion won "2026 budget proposal," the largest in history. The 2026 budget allocated for fostering SMEs and small business owners is 11.6465 trillion won, an increase of 9.0% (963 billion won) compared to this year's 10.6835 trillion won.
This growth rate exceeds the 8.1% increase in the total 2026 budget proposal. Considering that the budget growth rate for next year is the highest since 2022 (8.9%), when the country was suffering from the COVID-19 pandemic, it demonstrates the Lee Jae-myung administration's deep concern over the recovery of damages suffered by SMEs and the self-employed due to this year's economic slowdown.
According to the Financial Supervisory Service's "Status of Won-denominated Loan Delinquency Rates at Domestic Banks," the corporate loan delinquency rate stood at 0.73% at the end of last August (all figures as of the end of August each year), up 0.11 percentage points from a year ago (0.62%). This corporate delinquency rate is at its highest level in seven years since it recorded 0.88% in 2018.
After recording 0.88% in 2018, the corporate delinquency rate followed a downward trend for several years—0.65% in 2019, 0.47% in 2020, 0.36% in 2021, and 0.27% in 2022—before rising to 0.47% in 2023, 0.62% in 2024, and continuing to rise this year.
The problem is that the corporate delinquency rate is rising primarily among SMEs and the self-employed. In the case of large corporations, the delinquency rate this year was 0.15%, up 0.10 percentage points from last year's 0.05%, but this is only about half the level of the previous record high of 0.30% in 2021.
In contrast, the delinquency rate for SMEs reached 0.89% this year, the highest level in nine years since hitting 0.93% in 2016. The SME delinquency rate peaked in 2016 and then fell to 0.73% in 2017, 0.66% in 2018, 0.64% in 2019, 0.51% in 2020, 0.37% in 2021, and 0.30% in 2022. However, it rose to 0.55% in 2023 and has continued to surge over the past two years.
The situation was similar for the self-employed. The delinquency rate for the self-employed reached 0.78% this year, the highest level since relevant statistics began in 2016. The delinquency rate for the self-employed fell from 0.48% in 2016, when it was first recorded, to 0.40% in 2017 and 0.37% in 2018. It rose slightly to 0.40% in 2019, but fell back to 0.32% in 2020 and 0.22% in 2021. However, it has been rising steadily since, reaching 0.45% in 2022, 0.50% in 2023, and 0.70% in 2024.
This indicates that the financial situation of companies, especially SMEs, is poor. This worsening financial situation is also reflected in the fact that corporate reliance on borrowed funds has reached its highest level in a decade. The debt-to-asset ratio (borrowing dependency), which is the ratio of total borrowings (liabilities incurred by companies through bank loans or corporate bond issuance) to total assets, is one of the key indicators of a company's financial soundness.
In the second quarter of this year, the borrowing dependency of Korean companies was 26.65%, the highest figure since the second quarter of 2015 (26.87%), when the relevant survey began. For large corporations, the borrowing dependency was 25.11%, 1.54 percentage points lower than the overall average, whereas the borrowing dependency for SMEs reached 32.80%.
Higher borrowing dependency means that companies face larger financial costs, such as interest, which hurts profitability. This higher borrowing dependency compared to large corporations was observed in both the manufacturing and non-manufacturing sectors. In the manufacturing sector, large corporations had a borrowing dependency of 20.31%, while SMEs were nearly 10 percentage points higher at 30.23%. In the non-manufacturing sector, large corporations were relatively high at 31.20%, but SMEs were even higher at 35.23%.