The loan delinquency rate among self-employed individuals in South Korea is at its highest level in 12 years as the prolonged slump in domestic demand continues.

According to data released by the Bank of Korea (BOK) on Wednesday, the delinquency rate for vulnerable self-employed borrowers stood at 12.24 percent in the first quarter of 2025. This is the highest level since the second quarter of 2013 when it hit13.54 percent.

Vulnerable self-employed borrowers refer to those who are low-income, low-credit multiple debtors, while loan delinquency is defined as principal and interest payments being overdue by one month or more.

The deterioration in self-employed loan performance during the cited period was more pronounced in the non-banking sector, as signs of polarization emerge.

The overall delinquency rate for self-employed loans across both banks and non-bank institutions was 1.88 percent, but the rate for non-bank self-employed loans was 3.92 percent, the highest level in 10 years since the third quarter of 2015 when it was 4.60 percent.

In contrast, the delinquency rate in the banking sector was only 0.53 percent.

This trend is attributed to struggling self-employed individuals shifting to non-bank lenders as their creditworthiness deteriorated, making it difficult to secure loans from banks.

These self-employed individuals are also vulnerable to liquidity risks. Non-self-employed households had financial assets exceeding their liabilities by 20 million won ($14,714) as of the first quarter of 2024, whereas self-employed households were in a net financial debt position with liabilities exceeding assets by 29 million won.

“The livelihood support funds being considered in the government’s second supplementary budget will help self-employed individuals recover their income by boosting consumption, increasing sales, and improving the service economy,” BOK Deputy Governor Lee Jong-ryeol said. “We also hope that debt restructuring through the write-off of long-term delinquent bonds will aid in the rehabilitation of vulnerable self-employed borrowers.”

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