A corporate loan consultation screen displayed on a bank kiosk in Seoul. [Yonhap]
A corporate loan consultation screen displayed on a bank kiosk in Seoul. [Yonhap]

The delinquency rate on loans to small and medium-sized enterprises has risen for two consecutive months, pointing to a deepening cash crunch in the sector. Exports led by cosmetics and semiconductors continued to post double-digit growth, but manufacturing output remained in decline — a sign that the broader economic recovery has yet to reach SMEs on the ground, analysts said.

According to the July 2026 edition of the KOSI SME Trends report, released Thursday by the Korea SMEs and Startups Institute, the delinquency rate on SME loans at deposit-taking banks stood at 1.00 percent at the end of May, up 0.10 percentage points from the previous month. The rate has climbed steadily — from 0.81 percent in March to 0.90 percent in April — while the average SME lending rate also rose to 4.38 percent over the same period, up 0.23 percentage points from the prior month.

The institute said rising consumer and producer prices, combined with a higher delinquency rate, are intensifying the financial burden on small businesses.

Exports, however, remained solid. SME exports in the second quarter totaled $33.91 billion, up 12.7 percent from the same period last year, driven by strong cosmetics and semiconductor shipments despite fewer working days. Growth was recorded across major markets, including China (17.0 percent), the United States (7.3 percent) and Japan (5.8 percent).

Output trends diverged by sector. Small and medium-sized manufacturing output fell 3.7 percent year-on-year in May, weighed down by weakness in the automotive and petroleum-refining industries, while SME service-sector output rose 2.2 percent, led by professional, scientific and technology services and the information and communications industry.

Domestic demand showed a modest recovery. Retail sales in May reached 58.2 trillion won ($39.7 billion), up 5.6 percent from a year earlier, while online shopping transactions grew 10.3 percent to 25 trillion won, driven by cosmetics and food and beverage purchases.

The number of employed workers at SMEs — defined as firms with fewer than 300 employees — stood at about 25.74 million in June, roughly unchanged from a year earlier.

"Economic indicators are sending mixed signals, with manufacturing output continuing to contract while service-sector output and exports remain strong," the institute said. "With inflation and loan delinquency rates both continuing to rise, policy measures are needed to ease cost burdens and strengthen financial soundness."


boo@heraldcorp.com