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By Jhoo Dong-chan
Household and corporate loans offered by non-banking financial firms soared by 43.1 trillion won (38.15 billion) in the first half of this year to reach 831.25 trillion won, the Bank of Korea (BOK) said Sunday.
The amount was the highest January-to-June growth since the BOK began compiling related data.
Financial analysts say the rapid increase was attributed to an increase in the number of households and small businesses eyeing secondary banks after experiencing difficulties in borrowing money from commercial banks.
"It is getting harder for them to borrow money from regular lenders because of their lower credit rating," an NH NongHyup Bank employee said.
"Secondary banks loan money with higher interest rate up to 25 percent. It's a burden. They came for money, but what really drives them in the corner is the interest rate."
He and other observers claim any possible policy rate hike or prolonged downturn in the local economy could deal a severe blow to households and small businesses.
Secondary banks refer to life insurers, mutual funds, mutual savings banks and credit unions. According to the BOK, the average loan rate of mutual savings banks and funds were annually 10.26 percent and 4.07 percent, respectively, as of June _ higher than regular lenders' figure of 3.65 percent.
Despite the disappointing economic index, the BOK is under mounting pressure to raise the key rate as the U.S. Federal Reserve signaled that it will continue its credit-tightening stance through additional rate hikes.
Federal Reserve Chair Jerome Powell said the Fed will raise the rate twice more this year, signaling the markets that it will hike interest rates in September and possibly December.
"Household and small business debts are already too high. If the central government raises the key rate, more people will experience difficulties in paying back their debts. Many businesses will go out of business. The decision will shake the nation's financial sector as a whole," a Nomura Securities researcher said.
"The government should create a business environment to encourage firms to make more investment, and then come up with a measure to help ease the nation's frozen job market before raising the key rate. It is just not the right time."
The BOK has recently lowered its estimates for job creation to 260,000 for the year from a previous projection of 300,000. At the same time, total household debt is increasing steadily and reached a record 1,468 trillion won in the first quarter of this year.
