Recently, banks have been successively launching small-amount loan products aimed at seniors who receive pensions.

On the 8th, Shinhan Bank launched ‘Shinhan Basic Pension Emergency Loan’ for seniors who receive the basic pension into a Shinhan Bank account.

This product is set at an ultra-low interest rate so that basic pension recipients can respond stably to sudden needs for living funds such as hospital bills, utility charges, and expenses for family events. Offered as an overdraft account (ma-tong) with a limit of $375 (500,000 KRW), it has a loan term of three years and an annual interest rate of 0.1%. The product is limited to a total of 100,000 accounts. Shinhan Bank described the loan as “an inclusive finance product prepared to support demand for living expenses.”

Hana Bank also unveiled ‘Hana OneQ Pension Living Expense Loan’ for customers who receive public pensions. The product targets recipients of the four major public pensions: the National Pension, Government Employees Pension, Teachers Pension, and Military Pension. The interest rate is a fixed 1.0% per year. It operates as an overdraft account and is offered with a limit of $375 (500,000 KRW). Applications can be submitted through the Hana OneQ application (app) without visiting the bank.

Hana Bank said it has increased repayment stability by linking the loan to the pension-receiving account, and it also expects the product to help prevent vulnerable groups from being drawn into the high-interest loan market.

The successive launches of small overdraft-account products for seniors by commercial banks are seen as both responding to the call by President Lee Jae Myung for ‘inclusive finance’ and as a strategy to increase incentives to retain elderly customers.

Elderly poverty is becoming increasingly serious. In 2023 data from the Organisation for Economic Co-operation and Development (OECD), based on 2020, South Korea had the highest income poverty rate among member countries for those aged 66 and older, at 40.4%. That is three times the OECD average (14.2%). In particular, the income poverty rate for older women was 45.3%, higher than for men (34.0%).

In South Korea, the income replacement rate of public pensions, combining the National Pension and the Basic Pension, remains at 35-40%, about half of the adequate retirement income benchmark (70%).