[Edaily Reporter PARK JONG-HWA ] A red flag has been raised regarding the soundness of Nonghyup’s farmland-secured loans. With non-performing loans rising sharply, concerns over loan defaults are expected to grow even further if farmland prices plummet following surveys of farmland.

According to data submitted to Rep. Kang Seung-kyu of the National Assembly’s Committee on Agriculture, Food, Rural Affairs, Oceans and Fisheries by the National Agricultural Cooperative Federation (Nonghyup) and other entities on the 7th, non-performing loans among farmland-secured loans issued by Nonghyup Mutual Finance and NH Nonghyup Bank totaled 3.7764 trillion won as of the end of August. Non-performing loans refer to bad debts where the loan has been in arrears for more than three months and is difficult to recover. The outstanding balance of farmland-secured loans at the two institutions totals 82.3949 trillion won, meaning 4.6% of that amount is at high risk of becoming non-performing.

In particular, Nonghyup Mutual Finance is seeing its non-performing loan ratio for agricultural land-secured loans rise steadily. As of the end of 2024, Nonghyup Mutual Finance’s non-performing loans stood at 2.0884 trillion won, but in less than two years, this figure surged by over 70% to 3.617 trillion won. The proportion of non-performing loans out of the total loan portfolio also rose sharply, from 2.9% in 2024 to 4.0% in 2025 and 5.1% as of the end of August this year. During the same period, the delinquency rate also rose from 3.4% to 5.7%.

In reality, farmers who lack other suitable collateral often borrow funds for farming by using farmland as collateral. However, as agricultural incomes stagnate and the burden of interest payments grows, non-performing loans secured by farmland are on the rise. In response to rising delinquency and non-performing rates, local agricultural cooperatives are tightening lending standards by raising the bar for new farmland-secured loans.

The problem is that there is a significant risk that non-performing loans secured by farmland will increase as farmland prices have fallen due to recent surveys and other factors. Farmland that sold for 81,000 won per square meter in 2021 has dropped to the 50,000 won range this year. This is due not only to the inherently strict requirements for acquiring farmland but also to a sharp drop in demand following the government’s recent comprehensive survey of farmland, through which it signaled its intention to restrict the acquisition of non-cultivated and speculative farmland. As farmland prices fall, the collateral value of farmland-secured loans declines, thereby increasing the risk of loan defaults.

Furthermore, in a situation where farmland transactions are sluggish as they are now, even if financial institutions put farmland up for court auction, it is difficult to find bidders, making loan recovery unlikely. So far this year, the success rate for farmland (paddy fields and dry fields) put up for court auction has been a mere 16.3 percent. This means that even when farmland is put up for auction, more than eight out of every ten cases end without a sale.

Rep. Kang Seung-kyu emphasized, “With non-performing loans secured by farmland on the rise, if this is compounded by falling farmland prices and a slump in transactions, the financial burden on farmers will inevitably grow even heavier,” adding, “The government must devise measures to ensure that the comprehensive survey of farmland does not result in further hardship for farming households.”