03/08/2006, 00.00
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Loans, special terms for families with children

by Theresa Kim Hwa-young

The birth rate is falling and life expectancy is climbing in South Korea. To counter the ageing population, banks and insurance companies are offering new products and special terms for families with children.

Seoul (AsiaNews) – South Korean banks and insurance companies are planning to offer new products and services for families with children or expecting babies, in line with a new government campaign to increase the low birth rate.

Woori Bank, Korea's third-largest financial service provider, rearranged its home mortgage to offer a 0.1% cut in annual interest rates to households with more than three children under the age of 20. The product also provides subscribers a maximum loan repayment period of 11 years, up from the three years offered by the loan's older version. A company spokesman said: "We have thoroughly studied the country's population figures, including the number of people applying for mortgage with more than three children. We will continue to develop new products that encourage people to have more children."

This initiative is only the latest in a series of measures already underway: a new type of savings account, set up in August 2005, has proved very successful: more than 1.7 billion won have been deposited since it was launched.

The Industrial Bank of Korea has introduced a new savings account, which provides higher rates of interest depending on the number of children in a family: 0.1% more in interest rates for the subscriber's first child, 0.2% more for the second child and from 0.3 to 1% for more than three children.

South Korean society is worried about its low birth rate: economists have warned about the risks linked to an ageing population, like the loss of a productive work force and difficulties in maintaining social services for elderly people. In fact, the drop in birth rates coincides with longer life expectancy: the National Statistical Office (NSO) calculates that by 2018, Korea will be an "aged society", meaning people over the age of 65 will account for 14.3% of the total population. By 2050, one Korean in five will be over 65.

South Korea's birth rate in 2005 was 1.22, far from the global average of 2.6 reported by the United Nations. It is the lowest birth rate of member states of the Organization for Economic Cooperation and Development (OECD).

Last year, the Ministry of Health and Welfare announced plans to invest about 10 trillion won ( billion) by 2009, to deploy a package of measures to encourage families to have more children.

And the gap between the rich and the poor continues to widen: the Gini index, which gives a picture of economic disparity, went from 0.306 in 2003 to 0.310 in 2005 (1 represents the maximum rate of inequality between rich and poor).

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