As loan delinquency rates among self-employed individuals continue to rise, the number of businesses closing due to overwhelming debt burdens is steadily increasing. (Yonhap)
SEOUL, Jan. 13 (Korea Bizwire) — The debt burden among South Korea’s self-employed in their 50s and 60s has surged to unprecedented levels, raising concerns over financial stability amid sluggish domestic demand and persistently high interest rates.
According to data submitted by the Financial Supervisory Service (FSS) to Democratic Party lawmaker Lee Kang-il, as of November 2024, personal business loans held by self-employed individuals totaled 1,125.3 trillion won ($862 billion).
Of this amount, entrepreneurs in their 50s and 60s accounted for approximately 65%, with those in their 50s owing 366.4 trillion won and those aged 60 and above holding 370.9 trillion won in debt.
Notably, nearly half of these older entrepreneurs are classified as multi-debtors, having borrowed from three or more financial institutions, making it increasingly difficult for them to secure additional credit or refinance existing loans.
Data shows that 957,971 self-employed individuals in their 50s and 60s, or 47.1% of this demographic, are now at a critical threshold of financial vulnerability.
The rapid growth in debt among senior entrepreneurs is particularly alarming. Loans held by those aged 60 and older increased by 22.9 trillion won (6.6%) from 348 trillion won at the end of 2023 to nearly 371 trillion won in late 2024.
In contrast, the overall debt growth across all age groups was a mere 0.2% over the same period.
A Loan Information Notice at a Bank in Seoul (Yonhap)
Loan delinquency rates among self-employed borrowers have also escalated. As of October 2024, the delinquency rate for personal business loans at banks stood at 0.65%, up from 0.51% a year earlier.
This figure has nearly tripled since October 2022 when it was 0.22%. The Bank of Korea’s Financial Stability Report released last month highlighted that the overall delinquency rate for self-employed borrowers reached 1.70% at the end of the third quarter—the highest level since the first quarter of 2015.
Economic stagnation, compounded by political instability and declining consumer spending, has made it particularly difficult for middle-aged and older entrepreneurs to recover. With limited opportunities for re-employment, many face sustained financial pressure.
Calls for government intervention are growing louder. The Financial Services Commission (FSC) has pledged to expand the ‘Fresh Start Fund,’ a debt relief program for small business owners, from 30 trillion won to over 40 trillion won to support struggling entrepreneurs.
Lawmaker Lee emphasized, “With the economy contracting, self-employed businesses are in crisis, and the hardships faced by elderly entrepreneurs are deepening. Strengthening financial safety nets, including tailored support for small businesses and inclusive financial measures, is urgently needed.”
As South Korea braces for further economic challenges in 2026, the rising debt burden on aging entrepreneurs poses a significant risk to the country’s financial stability and underscores the need for swift policy action.
Ashley Song (ashley@koreabizwire.com)
