|Sanwa Money head office in Gangnam-gu, Seoul / Yonhap|
By Jhoo Dong-chan
Japan-based private moneylender Sanwa Money has halted new loans to Korean customers for five months, sources said Thursday.
This came as the largest private moneylender active in Korea, which stopped granting new loans on March 1, suffered a deteriorating margin since the government has been continuously lowering the maximum legal interest rate limit for years.
The suspension of the loan business here could also be affected by the Japanese lender's massive losses from its investment in Turkish bonds in May 2018. The Korea Investors Service said Sanwha Money sustained 123 billion won ($105 million) worth of losses from its investment in Turkey.
"Apart from larger ones such as Sanwa and Rush & Cash, most private moneylenders have suspended granting new loans over the past few years due to a series of government moves to lower the maximum legal interest rate," said a savings bank official who asked not to be identified.
"I understand these firms, now including Sanwa, are engaging in debt collection operations."
Observers even said Sanwa could shut down its operation in Korea and seek entry into the Southeast Asian market, citing renewed anti-Japanese sentiment among Korean customers following a trade feud between the two countries.
The higher maximum legal interest rates in the ASEAN countries is another reason behind Sanwa's possible exit from Korea.
In February 2018, the Korean government lowered the maximum legal lending rate to 24 percent in a bid to help ease the financial burden for desperate money borrowers.