The online investment-linked finance industry is expanding loan supply to mid- and low-credit borrowers based on investments linked with financial institutions. Private mid-rate loans accounted for 94.8 percent of personal credit loans at six major online lending firms. Their average loan rate was about 3 percentage points lower than savings banks.

The Online Investment-Linked Finance Association said on Monday the share of private mid-rate loans at six companies participating in financial institution-linked investments stood at 94.8 percent as of end-September this year. The firms are MoneyMove, Mouda, HonestAI, Eight Percent, PFCT and Hanpass Financial.

The average credit score of borrowers in the firms’ personal credit loans was 686 based on KCB. The share of loans supplied to the bottom 10 percent of borrowers with credit scores of 675 or lower also accounted for 45.0 percent.

Despite lending focused on mid- and low-credit borrowers, the delinquency rate for personal credit loans at the six companies stood at 1.09 percent as of end-September. The figure includes delinquencies of 30 days or more and rehabilitation claims. Excluding rehabilitation claims, the rate was 0.76 percent.

The average annual loan rate was 11.72 percent, 2.95 percentage points lower than the average annual personal credit loan rate of 14.67 percent for the savings bank sector over the same period. The association explained that online lending firms are supplying mid-rate loans to borrowers who found it difficult to borrow from traditional financial institutions by using their own credit assessment technology.

The scale of lending also increased. From end-May last year to end-September this year, cumulative personal credit loans handled by the six firms totaled 811.4 billion won, and new borrowers totaled 53,038. Monthly new lending rose about 36-fold to 99.94 billion won in September this year from 275 million won in May last year.

The growth was influenced by an expansion of financial institution-linked investments with savings banks. The number of savings banks taking part in linked investments at the six firms rose to 20 in September this year from 5 in May last year, based on the maximum figure by company. The monthly average investment amount per savings bank also increased to 2.519 billion won from 213 million won.

The online lending industry began linked investments with savings banks in May last year after regulatory improvements and designation as an innovative financial service in 2024. It is also discussing plans to broaden cooperation to mutual finance and expand the scope of use to loans to individual business owners.

Hong Jae-moon (홍재문), head of the association, said, "Inclusive finance is the starting point and reason for the online lending industry’s existence." He said, "We will work with the industry to create a fair competitive environment so that the industry’s will to innovate is not discouraged."