South Korea to build alternative credit models for construction, platform workers

The government plans to develop alternative credit scoring models tailored to workers employed at construction sites and on digital platforms. Because their incomes are irregular, the models will draw on non-financial data such as mutual-aid contribution payment histories. The move is expected to lower the bar for loans available to construction and platform workers.

The Financial Services Commission signed a memorandum of understanding Wednesday at the headquarters of the Construction Workers Mutual Aid Association in Jung-gu, Seoul, with the Ministry of Employment and Labor, the Financial Supervisory Service, the Korea Federation of Banks, Korea Credit Information Services, the Construction Workers Mutual Aid Association and the Korea Workers' Compensation and Welfare Service.

The agreement aims to improve financial access for construction workers and service providers — including platform and freelance workers — and to address the difficulties they face in using financial services.

Under the MOU, the government and partner agencies will build an alternative credit assessment system using employment and service-provision records. They agreed to incorporate a range of non-financial data, including construction workers' mutual-aid contribution payment histories held by the Construction Workers Mutual Aid Association and the Korea Workers' Compensation and Welfare Service, as well as activity records of platform service providers. The framework is expected to be included in an individual alternative credit assessment plan set for release by the end of this year.

Once the assessment system is in place, work and service-provision histories could be factored into financial institutions' credit evaluations and loan screening. With more data feeding into credit assessments, the financial sector expects interest rates on loans offered to these workers to fall below current levels.

The government and partner agencies also agreed to develop financial products tailored to construction workers and platform service providers. Financial institutions plan to launch customized products next year, drawing on employment history data provided by the Construction Workers Mutual Aid Association and the Korea Workers' Compensation and Welfare Service.

The parties also agreed to strengthen links between financial institutions' in-house debt restructuring programs and those of related agencies such as the Credit Recovery Committee, and to expand financial and debt counseling support.

FSC Chairman Lee Eok-won said at the signing ceremony, "If financial institutions can receive information such as employment and industrial accident insurance assessment data, retirement mutual-aid contribution records, and construction workers' skill-grade ratings from the Korea Workers' Compensation and Welfare Service and the Construction Workers Mutual Aid Association — and use that information in loan screening — then workers' diligent employment histories and skill levels will be recognized as creditworthiness."

Employment and Labor Minister Kim Young-hoon said the way a person works should not determine their access to financial services. "We will work closely with relevant agencies to ensure that the work and service-provision histories of construction workers and platform service providers are fairly evaluated in the financial sector, so that more people can access the financial services they need," Kim said.