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BOK Working Paper No.2018-11, An Analysis of the Credit Behaviors of North Korean Defectors in South Korea

Economic Research Institute (+82-2-759-5468) 2018.04.19 5901

Title : An Analysis of the Credit Behaviors of North Korean Defectors in South Korea

Author : Seungho Jung(BOK), Byongki Min(BOK), Juwon Kim(NICE Information Service Co., Ltd.)


This paper examines the credit behaviors of North Korean defectors living in South Korea, using Korean credit bureau data. We construct individual-level panel data on North Korean defectors and South Korean residents sharing similar characteristics in terms of demographic and economic variables. The results of our panel analyses reveal a significantly higher number of delinquencies and defaults by North Korean defectors compared to the South Korean control group. Subsequent analysis of the credit management determinants also indicates significant differences between the two groups. While the number of delinquencies by North Korean defectors falls more rapidly than that in the control group as their credit histories lengthen, the number of defaults, which are long-term delinquencies, increases more rapidly. This implies that defectors' credit management capacities are improving as they accumulate financial experience, but that their resilience can be weaker in conditions of heavy debt. While the number of delinquencies in the control group does not differ by gender, the North Korean male defectors, who because of their long-term mandatory military service are expected to lack experience in informal economic activities compared to the female defectors, show a significantly higher number of delinquencies. These findings suggest that the lack of financial knowledge stemming from prolonged residence in a socialist society has a negative impact on defectors’ financial adaptation in South Korea. Therefore, in order to increase the degree of financial inclusion for North Korean defectors, additional support, such as financial education, should be considered.