Local banks are bracing for more trouble - namely defaults by small-and medium-sized companies (SMEs) - after getting burned by credit card companies.
A growing number of SMEs are teetering on the brink of bankruptcy.
“About 80 per cent of local SMEs have faced cash flow problems amid the soaring raw materials prices,” says an executive of the Korea Federation of Small and Medium Business.
Many banks increased lending to SMEs last year as they were pressed to squeeze loans to consumers.
Loans to the SMEs jumped 44 per cent over the past three years, up from 164 trillion won in December 2001 to 236.6 trillion in December 2003. They rose again to 243.2 trillion won in January 2004.
Among the 243.2 trillion won in loans, around 30 per cent, or 80 trillion won, are unsecured loans, according to FSS officials.
