Scorching summer weather is making it harder for self-employed individuals in the restaurant and accommodation sectors to pay back the principal and interest on their loans in time.
They account for nearly one-third of the country’s self-employed individuals, estimated at over 6 million. Many are still struggling with loan repayments after borrowing from banks to sustain their pandemic-affected businesses, according to the Korea Federation of Self-Employed Small Business.
During the peak summer holiday season, operators of small restaurants and motels are falling short of expected profits, as consumers are less inclined to travel domestically due to a heat wave following heavy monsoon rains.
Under these circumstances, data from the 한국을 Industrial Bank of Korea (IBK) revealed that the rate of missed repayments among self-employed individuals surged to 1.72 percent from April to June.
It was the highest delinquency rate seen since the government began compiling relevant data in 2015 and was over twice the 0.73 percent rate seen in the manufacturing sector during the same period.
The Korea Federation of Self-Employed Small Business anticipates the delinquency rate will rise throughout 2024, given that the summer holiday season, along with Seollal, Chuseok, and year-end, is typically a peak sales period.
“Things could get worse as the heat wave persists while summer is nearing the end,” a federation staff member said, asking not to be named.