A customer shops at the meat section at a supermarket in Seoul on June 11, 2026.YONHAP
Korea’s prolonged domestic slowdown is starting to hit even the most niche corners of its lending market, with growth in “grassroots” loans backed by churches, fish and cattle losing momentum.
Mutual finance institutions, which are built around cooperatives, provide locally focused lending to small businesses, farmers and other community-based borrowers, often tailoring products to the needs of their members.
While these loans are not classified as household lending and therefore are not subject to the financial authorities’ lending-growth caps, growth in such lending has begun to slow amid prolonged weakness in domestic demand.
As of the end of June, the balance of church-backed loans offered by the National Credit Union Federation of Korea stood at 1.67 trillion won ($1.23 billion), according to data compiled by the JoongAng Ilbo on Aug. 22. That was 5.8 times the 288.8 billion won recorded at the end of 2017, when the data series began, but the pace of growth has slowed sharply.
The balance of church-backed loans at the National Credit Union Federation of Korea rose by an average of 85.5 billion won every six months from 2018 through 2025. But the increase was just 15.6 billion won in the first half of this year.
An advertisement for a church-backed loan offered by a member of the National Credit Union Federation of Korea.NATIONAL CREDIT UNIOT FEDERATION OF KOREA
The loans are primarily offered to pastors and are secured by church buildings or land. Pastors use the loans to purchase additional church property, finance construction or expansions, and cover operating expenses. Interest rates vary depending on the pastor’s credit rating, but generally range from 4 percent to 6.5 percent a year.
The balance of what is sometimes called “fish-backed loans” — loans secured by frozen seafood — offered by the National Federation of Fisheries Cooperatives stood at just 21.9 billion won at the end of June, the lowest level since the data series began in 2017.
Under the program, frozen seafood stored in commercial warehouses is assigned collateral value equal to up to 80 percent of its appraised value. The figure rises to 90 percent when the seafood is stored in a warehouse directly operated by the fisheries cooperative.
Most of the loans are short-term, with maturities of around six months. Interest rates take into account factors including the borrower’s credit rating and how frequently they do business with the cooperative.
“Because these loans are backed by collateral, fisheries operators can access them at lower rates than conventional unsecured loans,” a fisheries cooperative official said. “Loan balances also tend to grow more in the second half of the year than in the first, as catches typically increase in the fall and winter, when natural disasters such as typhoons are less frequent.”
Regional livestock cooperatives under the National Agricultural Cooperative Federation also offer movable-asset loans secured by cattle raised by livestock farmers. The product was introduced on a pilot basis in June 2023, but the outstanding balance stood at just 241 million won at the end of last year.
Mutual finance institutions say weak domestic demand has been a major reason growth in locally focused lending has remained sluggish this year. The small business sentiment index, which measures the economic confidence of small business owners, fell to 55.6 points in July from 79.1 in October last year. This suggests that while semiconductor exports are booming, conditions are worsening for small individual businesses.
“When domestic demand improves, churchgoers are able to give more in donations, and churches’ demand for funding to expand their operations can also increase,” a mutual finance industry official said. “In the first half of this year, however, pastors, farmers and fishermen were all feeling the effects of a particularly weak economy, so growth in these locally focused, collateral-backed loans was minimal.”
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
