What are the differences among micro-finance programs?


Recently, maybe you already heard about the National Happiness Fund. Some of you, however, were wonder hearing the news about the National Happiness Fund why there are so many small-loan finance programs. Apparently, each system has its characteristic. So, today I am going to talk about the differences among a various kinds of small-loan finance programs.

First of all, we can classify the programs according to whether it is overdue loans or not. In case of Smile Microcredit Program, Sunshine Loans, New Hope Loans, only loans which are not overdue can be an object of the programs. Among these programs, there are also differences at source of revenue, target of loans and interest ratio. Smile Microcredit Program is executed with dormant deposit and only people who have 7 to 10 credit ratings can apply to it. In case of Sunshine Loans, on the other hand, the finances are composed by public-private cooperation. That is, the government and finance company make an investment on halves for the source of revenue. People who have 6 to 10 credit ratings can use this program. New Hope Loans are run by commercial bank, so the interest ratio is the highest among the programs. Also, the range of an object of program is the widest.

savingsSecondly, we can also classify the rest programs with the period of overdue and the amount of loans. Free workout and Individual workout are commonly aimed at help the people by rescheduling a debt and prolonging the period of refund. But in the event of ‘Free workout’, it intends for the loans which is days in arrears are from 30 to 90 days. ‘Individual workout’, however, directs to the loans of more than 3 months. Unlike Individual workout, Free workout is an anticipative program. Nevertheless, these programs have a limit in providing just economic supports. So, the National Happiness Fund was born.

So, I will talk about the National Happiness Fund in detail. The National Happiness Fund is similar in period with Individual workout and the maximum amount of loans is not significantly different with other programs. The contents, however, is apparently different with others. As I mentioned above, existing programs are mainly focusing on the economic support. However, there have been needs for sustainable support for the delinquent. So, this fund was established with the object of credit recovery by easing the burden of debt and improvement of debt repayment ability.

Regarding these kinds of program, some people are worry about the moral hazard and difficulties of raising funds. These programs, though, eventually will be the foundation of more healthy and sustainable economy of Korea. In the pursuit of this purpose, FSS should do its best to play an important role in Korea’s economy and also constantly make an effort to make a sound national economy.

By Han So-yeon


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