The Korea Asset Management Corporation, the state-run agency handling debt relief for small business owners, is projected to see its debt-to-equity ratio reach 350% this year. The figure exceeds its earlier target by more than 110 percentage points as the Lee Jae-myung administration's aggressive push to clear delinquent loans has driven up purchases and write-offs of bad debt.
According to the office of Rep. Suh Il-jun of the People Power Party, a member of the National Assembly's National Policy Committee, KAMCO projected in its 2026-2030 mid- to long-term financial management plan that its debt ratio would reach 351.6% by the end of this year. That marks a jump of 117.3 percentage points from a year earlier and is 116 percentage points above the target set last year.
KAMCO cited expanded issuance of agency bonds, driven by rising demand for the New Start Fund, as the main reason for the surge. Demand outpaced expectations after the fund, which supports debt restructuring for self-employed business owners hurt by COVID-19, broadened its eligibility and enlarged its debt reduction benefits.
Applications rose to 71,000 last year from 57,000 in 2024, and 37,000 people applied between January and the end of July this year, with demand climbing steadily. "The New Start Fund has to issue agency bonds to raise the money for buying up the debt," a KAMCO official said. "There were months when applications came close to 10,000."
The problem is that there is no brake on KAMCO's steep debt growth. Its debt ratio stood at 181.7% in 2023, topped 200% for the first time in 2024 and is set to move well above 300% this year, just two years later. Total debt grew to 7.7 trillion won in 2023 from 3.9 trillion won in 2020 and is projected to reach 15.63 trillion won by the end of this year, effectively doubling every three years.
Debt could grow further as the government expands its program to clear bad loans. On the 28th of last month, 10 months after launching the New Leap Fund, the government said it would "actively restructure the debts of small business owners hurt by COVID-19 whose loans went delinquent before June 2023." KAMCO plans to set up a special purpose company next year with 500 billion won in capital to run the program.
Analysts say the government needs to move quickly to shore up KAMCO's financial capacity, warning that the agency could be hamstrung by its financial ratios and fall short in carrying out its core mandate. The government plans to inject a combined 1.2 trillion won into KAMCO next year, including 500 billion won to purchase long-delinquent loans from small business owners and 500 billion won to support the normalization of real estate project financing sites.
Still, KAMCO's investment plans through 2030 total 16.4 trillion won, limiting the effect of such support in offsetting the debt increase. "KAMCO, which responds to economic crises, needs to secure the financial capacity to absorb shocks," Suh said. "The government will have to devise measures to support KAMCO's fiscal soundness."
