From real estate to industry and livelihoods: Lee government's productive and inclusive finance push gains momentum

Shortly after taking office last June, the Lee Jae-myung administration established two pillars for its financial policy: productive finance and inclusive finance. The vision was to redirect capital flows away from real estate and toward advanced future industries and the real economy, broadening the foundation for economic growth and redefining the role of finance.

One year on, the government has moved beyond the blueprint stage and into full implementation, with tangible results beginning to emerge. The private financial sector's strong response to the government's push has accelerated the flow of funds into key industries and toward vulnerable groups.

Financial authorities said Sunday that the financial sector plans to supply approximately 1,242 trillion won (about $813 billion) through productive finance over the next five years — 616 trillion won from private finance and 626 trillion won from policy finance. By simple calculation, that amounts to roughly 250 trillion won a year, more than 30 percent of the government's total annual budget, being injected into the broader real economy.

What stands out is not just the scale but the pace of deployment, which has exceeded market expectations. In the first quarter of this year alone, 92 trillion won was channeled into productive finance sectors, including 9.9 trillion won in venture capital.

The activity of private financial groups has been particularly notable. The four major financial holding companies — KB, Shinhan, Hana and NH NongHyup — have cumulatively supplied 42.4472 trillion won in productive finance, equivalent to 62.5 percent of their combined annual target of 67.8717 trillion won. In less than half a year, they have nearly reached two-thirds of their yearly goal, signaling that private institutions, not just policy lenders, are actively directing funds toward productive sectors.

Meanwhile, the government's tightened mortgage lending regulations have visibly slowed growth in home-backed loans. The combined mortgage balance at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 613.3880 trillion won at the end of May, up just 1.7799 trillion won from 611.6081 trillion won at the end of last December. That compares with an increase of more than 15 trillion won over the same period last year.

These shifts reflect the government's expansion of incentives, including the rationalization of capital regulations. Measures such as easing risk-weighted asset requirements for lending to productive sectors have increased financial institutions' capacity to supply funds.

Specifically, the risk weight floor for new mortgage loans was raised from 15 percent to 20 percent, and the risk weight for unlisted equities was restructured — shifting the standard rate from 400 percent to 250 percent and the exception rate from 250 percent to 400 percent. Regulations were also revised to reduce risk coefficients when insurers invest in policy funds.

The National Growth Fund stands out by far as the most emblematic achievement of the productive finance drive. The fund aims to combine government policy capital as seed money with large-scale private investment, building a total pool of 150 trillion won to broadly support advanced strategic industries and their ecosystems.

To date, the fund has approved 12.5 trillion won in financing across 16 projects, including the Sinan Uido offshore wind power project, a Pyeongtaek AI semiconductor production facility, and AI companies Rebellions and Upstage. Investment has been concentrated in core technology sectors such as semiconductors, batteries and AI, while regionally based firms and small and medium-sized venture companies have also received allocations, helping to stimulate local economies.

A public participation tranche of the fund, designed to let ordinary citizens share in the gains of government-led growth, sold out its entire 600 billion won target allocation within five business days of launch. Financial authorities plan to release a second tranche in the second half of the year.

The other pillar, inclusive finance, is fulfilling a socioeconomic safety net role. The government has focused its policy efforts on meaningfully reducing the interest burden on ordinary citizens and financially vulnerable groups while dramatically improving their access to formal financial services.

The government cut the special guarantee interest rate on Haetsal-lon, the flagship low-income policy loan, from 15.9 percent to 9.5 percent annually, and reduced the rate on illegal private lending prevention loans from 15.9 percent to 6.3 percent. It also launched a low-interest livelihood loan for financially vulnerable borrowers and more than tripled the small-loan ceiling for debt-restructuring borrowers who have maintained consistent repayments. These measures aim to ensure that low-credit, low-income borrowers struggling under high interest rates can access funds through the formal financial system at reasonable terms.

The government also undertook sweeping debt restructuring for long-term delinquents facing extreme financial hardship. Through the Saedoyak Fund, a program for resolving long-overdue debt, it purchased approximately 9.1 trillion won in nonperforming loans, giving a total of 750,000 people — including overlapping cases — a path out of debt collection and back into normal economic life.

Major financial holding companies are also accelerating their inclusive finance supply in line with the government's direction. The five largest financial groups plan to commit 70.4 trillion won to inclusive finance over the next five years, with 13.22 trillion won earmarked for this year alone. Among them, the combined progress rate for KB, Shinhan, Hana and NH NongHyup has already surpassed 50 percent. Supply of Saeheuimang Holssi loans and the mid-rate Saitdol loans has increased, and guarantee-backed loan support for small business owners and micro-enterprises through special contributions to credit guarantee foundations has also expanded.

A notable aspect of the inclusive finance push is that it has placed the public role of finance at the center of national debate, building a degree of social consensus around the issue.

President Lee has repeatedly said in public forums that "finance lacks sufficient public character," emphasizing that entrenched financial exclusion can only be rooted out by breaking the financial sector's habit of chasing profit above all else. His argument is that restoring social responsibility and a public role — beyond mere profit-seeking — is the prerequisite for building a genuine foundation for inclusive finance.

Acting on that conviction, the government plans to formally launch the Inclusive Finance Strategy Task Force this month and begin a comprehensive redesign of the financial system. The task force will identify and address structural factors driving financial exclusion within the market, including flaws in credit scoring systems, prudential regulations and the underperformance of community finance institutions. Policy discussions are expected to accelerate on practical measures such as expanding alternative credit assessments using non-financial data and improving the structure of mid-rate lending.

Jo Seong-mok, president of the Small Finance Research Institute, praised the government's productive and inclusive finance drive, saying "the finance of the future will be redefined as a model that grows alongside the community, grounded in social trust rather than simple profit generation." He also cautioned that "the financial sector's participation has been somewhat passive, so it is important for the public and private sectors to communicate fully and build shared understanding."

5대 지주 1분기 포용금융 5.7조 공급…석달 만 연목표 43% 달성 [포용금융 현장을 가다]

https://biz.heraldcorp.com/article/10724673