South Korea to Ease Mutual Finance Rules, Offer Incentives for Inclusive Lending

South Korea’s financial authorities are moving to ease regulations on the mutual finance sector to expand inclusive lending, including incentives for cooperatives that increase loans to local communities and working-class borrowers.

The Financial Services Commission said it held a kickoff meeting on April 29 for a task force on institutional improvements for mutual finance and discussed measures to strengthen inclusive finance.

The meeting was aimed at helping mutual finance institutions reinforce their role as community- and working-class-focused lenders.

The government is pursuing reforms after concluding that lending by mutual finance institutions has increasingly shifted away from their founding purpose and toward real estate and loans to nonmembers.

According to the FSC, the share of loans by mutual finance cooperatives — including credit unions, agricultural cooperatives, fisheries cooperatives and forestry cooperatives — tied to real estate and construction rose to 23.7% in 2025 from 4.9% in 2015. Over the same period, the share of loans to nonmembers increased to 40.7% from 32.0%.

To encourage more inclusive lending, the FSC said it will review incentives such as adjusting the weighting of loans to local residents and working-class borrowers when calculating regulatory ratios, including the nonmember-loan ratio and the loan-to-deposit ratio. It is also considering additional regulatory relief for cooperatives that actively provide inclusive finance.

To promote social solidarity finance, the FSC said it will also review legal and institutional changes, including amending the Credit Union Act to allow credit unions to invest in other corporations.

The commission said it plans to set up a structure in which central federations support “inclusive cooperatives,” including by offering preferential interest rates, to prevent risks from rising as inclusive lending expands alongside regulatory easing.

It also said it will examine steps to strengthen credit assessment, including upgrading internal credit scoring systems, and to reflect inclusive finance performance in management evaluations.

Starting with the kickoff meeting, the task force plans to draft a tentative plan in June and, after consultations with relevant agencies, announce a final package in July.

Kim Jin-hong, director general of the FSC’s Financial Industry Bureau, said, “Along with soundness, inclusiveness is a key pillar that will drive the mutual finance sector’s restoration of trust,” and urged cooperatives to take an active role in expanding inclusive finance by leveraging their strength in member ties.