(Kakao Bank) |
Kakao Bank said its outstanding loans to mid- and low-credit borrowers have reached 15 trillion won ($10.5 billion), underscoring its role as a digital lender expanding financial inclusion in South Korea.
The milestone comes about eight years after the internet-only bank’s launch in July 2017, as it seeks to balance credit expansion with financial stability while serving borrowers overlooked by traditional banks.
The lender extended 1.2 trillion won in loans to such subprime borrowers in the first half of the year, raising their share to 33.1 percent of total outstanding loans as of the end of June. On a new-loan basis, the proportion surged to 49.4 percent, far exceeding the bank’s 30 percent target. The overall delinquency rate stood at 0.52 percent in the second quarter.
To better assess borrowers outside conventional credit models, Kakao Bank has developed a proprietary credit scoring system that incorporates non-financial data.
The bank said 56 percent of the lower-credit borrowers who took out unsecured loans in the first half saw their credit scores improve within a month, with an average gain of 46 points.
Among those who had outstanding loans from nonbank institutions such as savings banks and card companies at the time they took out loans from Kakao Bank, one in three saw their nonbank debt decline by an average of 4.4 million won within a month, while their credit scores rose by an average of 35 points.
“Typically, taking out a loan leads to a slight decline in credit score due to increased debt,” the bank said. “But in this case, the benefit of reducing high-interest loans from nonbank institutions outweighed the impact of the overall debt increase.”