The smile micro credit is a loan service for people who have problem with their financial credit status. Through this service, people with credit rate under 7th grade (credit rating data based on National Information & Credit Evaluation Inc, Korea Credit Bureau Inc) could apply for borrowing money from Smile micro credit bank without any mortgages, sureties.
The purpose of introducing this service is to make footholds for financially neglected class of people to be financially and socially independent. In addition to loan them, the service offers other extra options such as consultation on dept, adjustment of debt, gauging feasibility of businesses people are going to manage and support information on jobs to make them be more settled in the society.
The amount of loan has been expanded rapidly during a year because of keen interest from financially neglected class of people. From January to October of 2010, the amount of loan was 687.7 hundred million KRW and 10,416 people have used the smile microcredit loan already.
Since more corporations and banks have been participated in smile microcredit loan, the number of branch of smile microcredit loan has increased. Till October of 2010, there were 95 branches in the nation.
The smile microcredit loan is considered it has achieved positive effect on capital market for financially neglected class. Especially, Loan for Traditional market merchant has received a favorable evaluation from market and financial authorities. With the service above, merchants could escape from private loan with extremely high interest. It has helped merchants’ business more profitable than before. This achievement comes from increased accessibility to branches and the loan.
Furthermore, the service itself has introduced new type of Corporate Social Responsibility (CSR) to Korean companies that are not used to the concept. By letting companies join smile loan, the loan service has expanded financially and then improved the company’s image positively in the market as well.
Why the smile microcredit loan could be successful so far?
Reasons the smile loan could derive people’s interest rapidly are following.
1) Continuous expansion of branches
As the service had started, smile loan service had been for people living in Seoul and Gyeounggi province area. In March of 2010, almost 60% of branches were concentrated in capital region. With the increase of the number of branches, people easily are able to access to the loan without traveling to certain area.
2) Widen accessibility to the service
Mostly, the customers are not able to go to the branch since they have to take care of their own business during the daytime normally. So the smile loan service has visited directly to business place of customers where there is no branch nearby. Consultants were equipped with smart phone and lap tops so it was possible to support more information on the loan and business to more people even though there were distance between customers and branches.
From October to December of 2010, the smile microcredit bank will visit 40 traditional markets in the nation and are going to consult more people who really need money but don’t have enough time to visit office and information on the loan service.
3) Customized loan service to customers
Each branch has unique loan products to attract more customers. For example, SK Smile microcredit bank supports loans for hairdressers and delivery business with interest of 4.5% per year. And the loan for traditional market merchant is regarded interesting loan service as well. Since the popularity of the loan has been grown up rapidly, financial authorities and smile microcredit bank have planned to raise fund for the loan to 112 hundred million Korean won. Other smile loan banks are also trying to serve customized financial loan products. With above efforts of many smile microcredit loan branches, customers could easily find loan services that are fit on their business condition and ability.
What have to be improved?
Though smile microcredit bank have achieved success in managing own loan service and attracting customers, still there are several problems that need to be improved. For most, raising capital for smile microcredit bank located in local area is necessary. According to the press, local areas’ smile microcredit banks have problem with capital status because of lack of resources for loan. For example, Chuncheon branch can borrow 5 hundred million won from head office of smile microcredit bank for loan service. Problem is that there is no other way to raise funds except borrowing from the head. It is definitely small amount of money considering demand of the local market.
During a year of launching smile microcredit bank, there were problems in operating the loan. Some of them had been modified and others are still needed to be changed and improved. However, the smile microcredit bank is still meaningful since it is a loan service for low-income people under cooperation between government and private sector such as companies and private microcredit organizations.
For improving smile microcredit bank than present, continuous expanding branches, developing new loan service reflecting demand of customers should be followed along with putting more effort on raising capitals for loan service not to make customers wait for the money.
Kyoungmin Kim (firstname.lastname@example.org)