Seoul: The government has announced plans to expand the availability of mid-rate loans for mid-credit borrowers in an effort to improve financial accessibility and reduce dependency on high-interest lending, as stated by the financial regulator on Monday.

According to Yonhap News Agency, the Financial Services Commission (FSC) has released a comprehensive plan that permits credit card firms and other commonly utilized lenders to offer the Saitdol loan program. This program, which consists of policy-backed mid-rate loan products, has traditionally been provided by commercial and savings banks.

This initiative arises from growing concerns that an increasing portion of loans has been directed towards low-credit borrowers, thereby neglecting the needs of mid-credit borrowers. As a result, these borrowers are often forced to resort to high-interest lending due to limited access to bank loans.

To tackle this issue, the government intends to revise the supply criteria, ensuring that at least 70 percent of the loans are allocated to borrowers within the bottom 20 to 50 percent of the credit spectrum. Additionally, regulatory incentives will be introduced to encourage financial institutions to expand their mid-rate lending offerings.

The supply of Saitdol loans is projected to reach approximately 3.6 trillion won (US$2.45 billion) this year, with total mid-rate lending expected to increase by 1.1 trillion won year-on-year to 31.9 trillion won. Consequently, lending rates are anticipated to decline in alignment with reduced guarantee insurance premiums.

Furthermore, borrowers within the bottom 20 percent of the credit spectrum will receive enhanced support through policy-backed microfinance programs, with a total supply set at 12 trillion won this year. The FSC also announced the introduction of a new loan product for self-employed borrowers, which will raise the lending limit from 20 million won to 30 million won.