The Financial Services Commission announced a plan to introduce an artificial intelligence (AI)-based credit rating framework focused on the needs of small businesses and self-employed business owners at the third taskforce meeting on upgrading the credit rating system held on April 9.
Key Measures
a) Introducing Small Business & Self-Ownership Credit Bureau (SCB)
The Small Business & Self-Ownership Credit Bureau (SCB) is an AI-driven credit rating model specifically tailored to the needs and characteristics of small businesses and self-employed business owners. It is designed to evaluate the future growth potential of small businesses in their business areas by making use of a variety of nonfinancial data, such as the sales performance, the category and location of business operation and so on.
The SCB ratings (ranging between S1 and S10) combine the current CB ratings of small businesses with their potential future scale-up ratings. A higher score on the future scale-up ratings (e.g. S1 or S2) will help to push up the overall credit score of small businesses, making them eligible for more opportunities and enhanced benefits in their access to loans.
The potential future scale-up ratings of small businesses will be generated by combining an AI-based quantitative evaluation model taking into account a set of measurable variables and a qualitative evaluation model looking into particular characteristics and strengths of individual businesses. A higher score on the qualitative evaluation model will push up the ultimate SCB rating of small businesses, and a higher SCB rating will help to upgrade their overall CB ratings, making them eligible for more opportunities and enhanced benefits in their access to loans.
The SCB ratings for small businesses will be piloted with participating banks in the second half of 2026 (expected to be from August). After examining the outcome of pilot operation in the second half of 2027, credit bureaus and financial companies will then begin to adopt and make improvements to the SCB ratings systems of their own, with an aim to promote the establishment of an incentive-based SCB ratings system across all financial sectors.
b) Establishing Small Business & Self-Ownership Database (SDB)
There will be a database (Small Business & Self-Ownership Database) established at the Korea Credit Information Services (KCIS) to facilitate the credit ratings and statistical analysis performed by financial companies. Apart from the financial data required, the SDB will also collect and store a variety of nonfinancial data to promote the development of financial products and the provision of financial consulting specifically tailored to the needs of small businesses. In addition, the KCIS plans to provide explanations about key factors behind the SCB ratings of individual small businesses to credit bureaus and financial companies from the second half of 2026.
c) Promoting the adoption and use of the SCB rating system
The FSC plans to make relevant rules change and draw up incentives to promote an active adoption and utilization of the SCB rating system by financial companies. In this regard, a guideline will be prepared for financial companies to offer incentives through penalty relief and performance evaluation, and an upgrade to relevant regulations will be sought in the second half of 2026.
In the future, the use of SCB ratings by banks will be publicly announced along with their performance on social contributions and will be reflected in their overall inclusive finance performance.
Anticipated Effects & Further Plan
With the adoption of SCB ratings in the financial industry, it is expected that some 700,000 individuals every year will benefit through new loans (about KRW10.5 trillion) and/or lower borrowing costs (about KRW84.5 billion in interest rate reduction).
Over the medium- to long-term, financial companies will be able to more accurately assess the risk associated with lending to small businesses by more properly sorting out promising companies from unviable ones. The AI-driven SCB rating system will not only help to uncover the potential value of promising small businesses, but also help to expand the use of AI across the financial industry to promote an AI-driven growth in the economy.
The FSC plans to make necessary rules change and system upgrades by the third quarter of this year (expected to be in August) to prepare for the pilot operation of the SCB rating system with participating institutions. In the meantime, the FSC will continue to work with financial companies to promote an expanded adoption of the SCB rating system by nonbanks and policy financial institutions.
In addition, the FSC will continue to seek improvements in the personal credit rating system and work to promote a wider usage of alternative credit rating models.
* Please refer to the attached PDF for details.