Japan-based money lenders have sharply increased their share of the South Korean private-loan market over the past couple of years, data showed Sunday, raising concerns over the negative impact on local borrowers in the low-income bracket.
Under fire for charging exorbitant interest rates on borrowers who can’t access banks, private money lenders are often left unsupervised by regulatory authorities, prompting critics to call for the financial watchdog to ramp up its oversight.
The combined assets held by four major Japanese loan sharks came to 4.28 trillion won ($3.91 billion) as of end-June 2014, or 42.2 percent of the 10.1 trillion won private-lending market here, according to the data by the Financial Supervisory Service.
The figure marks a 6.6 percentage point rise from the 35.6 percent posted at end-2012.
Afro Financial took up 24.9 percent of the combined assets with 2.5 trillion won, and Sanwa Money held 12.4 percent at 1.2 trillion won. J Trust Co. took up 2.1 percent of the market.
South Korea-based Welcome Creditline was the biggest local player, but was only responsible for 7 percent of the market at 706.4 billion won.
Industry watchers said Japanese lenders are estimated to have two to three times more clients than South Korean players as they focus more on personal credit.
Japanese firms also hold the upper hand over local players as they can bring in capital from their home country at low interest rates, they added.
“Japanese private lenders are eating into the South Korean financial market for the low-income bracket,” said Rep. Hwang Ju-hong of the main opposition New Politics Alliance for Democracy. “The state authorities should come up with appropriate measures.”
The influence of Japanese capital is also spreading to the savings banking segment as well, the data showed.
Five Japanese-owned savings banks operating in South Korea, including SBI Savings Bank, saw their assets reach 7.5 trillion won at end-December, representing 19.8 percent of the market.
“South Korea’s financial regulations on loan sharks are mostly based on direct governmental control rather than market principles, which give Japanese firms more leeway,” said Cho Nam-hee, an official from the nonprofit Financial Consumer Agency.
“Thus, those in the low-income bracket, which make up the majority of their clients, find it hard to break away from loan sharks in case of defaults,” Cho added. (Yonhap)
