Wokai Blog: Korea To Become The World's Largest Microfinance Market By 2011?: Wokai China Microfinance Blog

A state-backed initiative that just began in December last year has already generated 91 billion won in loans. It looks as if there is a strong corporate push, as "Samsung Group, Hyundai Motor Group and other businesses and banks have committed 2 trillion won ($1.6 billion) over 10 years to provide microfinance loans."

I was surprised to see how low the interest rate is, at only 4.5%, and it would be interesting to see what the infrastructure is that enables this. Wokai's Field Partners charge between 8%-10%, and that just covers their operation costs of travelling to remote villages to educate rural peasants and collect repayments.

"Microfinance loans in Korea are available to individuals with assets of less than 135 million won ($110,000) if they reside in major cities, and less than 85 million won in provincial areas, according to the website of the Smile Microcredit Bank, which oversees the program.

Individuals can borrow up to 50 million won at interest rates below 4.5 percent, and have as long as five years to repay the debt, according to the website."

Also, interestingly, Korea's program runs on contributions from companies and banks, which takes a burden off state coffers. We have yet to see a strong corporate push for microfinance in China. If Korea does indeed see the tremendous success of its microfinance sector over the next year, it would be a great example for the burgeoning markets in the rest of Asia.