Shinhan Youth Loan Program Beats Annual Target Early

Shinhan Financial Group's inclusive finance drive is beginning to show results. Its "Youth Future Bridge Loan," designed for young people with thin credit histories, has hit its annual lending target ahead of schedule, and the group is now providing support payments to borrowers who have kept up with repayments on microfinance loans.

The Shinhan Microfinance Foundation extended 782 Youth Future Bridge Loans worth a combined 2.401 billion won this year through the 26th of last month, according to financial industry sources on the 3rd. That exceeds the foundation's target of 2.2 billion won for the year, or 109.1% of the goal.

As of the end of June, lending stood at 1.58 billion won, or 71.8% of the target. Another 821 million won was extended over the following two months, pushing the program past its annual goal. The average loan was about 3.07 million won.

The Youth Future Bridge Loan offers up to 5 million won at an annual interest rate of 4.5% to people aged 19 to 34 who are either in the bottom 20% by credit score or in the second-lowest income bracket or below, and who are unemployed or within one year of starting a job or a business. The money can be used for job-search costs, professional certification fees, and startup or early settlement expenses.

The expansion of youth support began in earnest immediately after Chairman Jin Ok-dong secured a second term. The day after shareholders approved his reappointment at the annual general meeting on March 26 this year, Jin signed an agreement with the Financial Services Commission and the Korea Inclusive Finance Agency to support young people and regions in crisis, and pledged an additional 100 billion won to the Shinhan Microfinance Foundation. It was the first time any of South Korea's 38 microfinance operators had decided on an additional contribution since the foundation was established in 2009, putting inclusive finance at the center of Jin's second term.

Of that contribution, 80 billion won will fund low-interest loans for financially vulnerable groups, including young people, low- and middle-income households and small business owners. The remaining 20 billion won will go toward helping young borrowers who repay microfinance loans on time build savings. The structure goes beyond widening access to credit, extending support through to financial independence after repayment.

Shinhan Financial will begin accepting applications on the 4th for the resulting program, called asset-building support for microfinance borrowers in good standing. It is open to customers who took out a Youth Future Bridge Loan or a youth working capital loan on or after April 1 this year and are repaying without arrears. Payments of up to 300,000 won per quarter, within the amount of principal and interest repaid, will be made up to 10 times per person, for a total of up to 3 million won. The 20 billion won pool is expected to benefit 10,000 young people over about eight years. The first payments will be made on October 12. "I did not want this to end with a loan," Jin said. "I wanted to give something back to those who repaid faithfully, so they can build assets of their own."