[Alpha Biz= Paul Lee] South Korea’s Saemaul Geumgo (Community Credit Cooperatives) issued more than ₩37 trillion in “out-of-region” loans over the past five years, sparking criticism over the effectiveness of current lending regulations and the potential for rising credit risk.



According to data submitted by the Ministry of the Interior and Safety to Democratic Party lawmaker Huh Young on August 3, Saemaul Geumgo extended ₩37.2 trillion (111,652 cases) in out-of-region loans between 2020 and 2024.



Out-of-region loans are defined as cases where the borrower’s address, workplace, or collateral property is outside the geographic jurisdiction of the Saemaul Geumgo branch issuing the loan.



Yearly breakdown:

2020: ₩6.77 trillion

2021: ₩12.57 trillion (sharp increase)

2022: ₩11.10 trillion

2023: ₩2.08 trillion (drop following a bank run incident)

2024: ₩4.69 trillion (rebounded)

2025 (H1): ₩1.96 trillion



Experts warn that repeated cross-regional lending undermines the cooperative model, as branches are extending loans without adequate understanding of local economies or borrower risk profiles. Physical distance also makes it easier for applicants to submit falsified documents, increasing the risk of fraud.



Saemaul Geumgo currently caps out-of-region loans at 33% of annual new lending. Beginning this year, a tiered quarterly cap was introduced (60% in Q1, 50% in Q2, 40% in Q3, and 33.3% in Q4), with a “sliding” mechanism that blocks further loans in the next quarter if the cap is breached.



However, compliance remains weak. Over the past five years, 272 branches exceeded the 33% annual limit, and in 2021, one branch issued 87.1% of its new loans outside its region.



Critics argue that the current year-end balance-based calculation is flawed:



“Branches can issue and repay loans repeatedly throughout the year, as long as they adjust the balance by year-end to stay within limits,” one analyst noted.



Observers say the system needs tighter, real-time oversight to prevent out-of-region loans from undermining sound lending practices and community-focused financial stability.

 

 

 

 

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