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| Tourists at Jeju International Airport on Saturday, two days before the Level 4 social distancing regulations take effect in the greater Seoul area. Yonhap |
By Lee Min-hyung
With Korea set to impose its toughest social distancing level for the next two two weeks from Monday, financial authorities are in a growing dilemma over whether to extend loan benefits to the self-employed and small business owners.
Under the Level 4 social distancing rules, more than two people cannot gather for outdoor activities after 6 p.m. in Seoul and its surrounding areas. Small business owners ― particularly those running restaurants, cafes and pubs ― will be hit hard by the heightened social distancing regulations.
The decision was made amid renewed fears of new infections, with the nation's daily COVID-19 caseload topping 1,000 for the fifth consecutive day since July 7.
This situation puts the Financial Services Commission and other authorities in a stalemate over their future policy direction. Ever since pandemic fears started engulfing the economy in March 2020, financial watchdogs have urged banks to delay receiving the interest and principal on loans from small business owners until the end of September.
But chances are that the timeline will be delayed further if the fourth wave of infections continues to weigh heavily on the economy. The bank industry estimates that loans offered to the self-employed and small- and medium-sized enterprises following the pandemic are worth a total 200 trillion won ($174.1 billion)
Representatives from the financial industry sector, however, said that it is not desirable for authorities to keep offering financial benefits to virus-hit groups in the name of helping them recover from the pandemic shock.
"Even if small business owners are in dire need of financial support during these coronavirus-induced economic doldrums, they should brace for the worst-case scenario after the pandemic subsides," an official from the industry said. "They will face a massive burden if they have to pay all the interest and principal back at one time after the pandemic comes to an end. Our view is that they need to start paying interest on their loans, as part of a step to hedge risks due to possible post-pandemic insolvency."
