The ruling Democratic Party and the Credit Counseling and Recovery Service (CCRS) are pursuing legislation of a “National Basic Finance Guarantee Act,” centered on introducing four basic financial pillars including basic loans and insurance.
Kim Eun-kyung, chairwoman of the CCRS, unveiled the proposed legislation on the 11th at the National Assembly in Yeouido, Seoul, during a launch ceremony for a financial fundamental rights research group and a policy debate. The debate was co-hosted by Democratic Party lawmakers Min Byung-duk, Jung Tae-ho, Kim Nam-hee, and Ahn Do-geol.
The core of the National Basic Finance Guarantee Act is to elevate financial services essential to a dignified life into a universal right, establishing a foundation for their use without discrimination. The bill guarantees beneficiaries of financial fundamental rights five rights: access, survival, recovery, self-reliance, and asset formation. The aim is to provide financial infrastructure to everyone, building a minimum line of defense for maintaining a dignified life. The act was modeled after the National Basic Living Security Act enacted in 1999, and Rep. Min plans to propose it as the lead sponsor around August.
Kim presented a four-pillar basic finance product system—loans, insurance, savings, and debt restructuring and counseling—as means to realize these rights. Just as the National Basic Living Security Act guarantees a dignified life through seven benefits including self-reliance and medical support, the goal is to create minimum infrastructure in the financial domain. The plan also calls for establishing a dedicated basic finance agency to guarantee the four basic financial products, with a strong likelihood of integrating the CCRS and the Korea Inclusive Finance Agency to assume this role.
For basic loans, a plan is being discussed to lend up to 10 million won at low interest over a long period to the bottom 30%. For basic insurance, a plan to establish public actual-cost medical insurance to ensure medical access is under review. Regarding funding, Kim emphasized, “The incidental profit commercial banks have earned by excluding low-credit borrowers is estimated at 14.7 trillion won alone,” adding, “There is a need to expand the entities required to contribute to the Korea Inclusive Finance Agency to the financial investment and virtual asset industries.” She added, “We will first provide debt restructuring and counseling, then support in the order of basic insurance, loans, and savings.”
However, there are considerable hurdles to overcome before realization. Although it is a government support project, the Financial Services Commission has made no notable comments regarding basic loans. The FSC is reportedly maintaining a stance of prioritizing the inclusive finance policy it announced in its work report early this year.
Concerns over moral hazard must also be dispelled. Last month, the National Assembly Budget Office cited the fact that the subrogation rate for Sunshine Loan 15 had risen by more than 12 percentage points over three years, warning that “policy microfinance without sufficient screening could lead to deepening multiple debts among vulnerable groups and declining credit ratings.” Kang Kyung-hoon, a business administration professor at Dongguk University participating in the research group, emphasized that the policy would be carefully designed, saying, “Measures such as mandatory counseling or proof of use for medical expenses and tuition are being discussed to minimize moral hazard.”