Many North Koreans in of business loans are unable to get them due to the country’s economic downturn and a custom of avoiding loans in the early months of a new year, Daily NK sources have reported. 

“Merchants are always in need of cash, but people tend to avoid loans in the early weeks of the new year,” a Ryanggang Province source told Daily NK on Dec. 13.

“Because of a superstitious belief that if you borrow or lend money in January you will suffer from money problems for the rest of the year, people avoid loans during the period,” said the source. “Because there’s less money circulating, this has negatively impacted many businesses.” 

Daily NK sources also pointed to the negative impact of international sanctions on North Korea’s economy to explain the economic slowdown. 


The effects of this market slump and mass business loan avoidance are reportedly being felt at Pyongsong Market, which is located in South Pyongan Province and is North Korea’s largest wholesale market.

“There are a lot of merchants who rely on business loans at Pyongsong Market, but few lenders open their wallets in January,” a South Pyongan Province source said, adding that the lack of loans has slowed product sales.

“There is hardly anyone who doesn’t rely on cash loans, from market merchants to people who run private sales stalls,” the source continued. “Business hasn’t been great and people have spent a lot of money on kimchi-making and preparing for the winter so they have little left for their businesses. Despite this, few people are lending out money.” 


North Korea’s entrepreneurial class, the donju, control the country’s private loan market. Donju provide cash services such as currency exchange or private loans, often while running other businesses in construction or retail distribution.

After North Korea’s economic collapse in the mid-1990s, donju were treated as predatory lenders because they charged interest rates exceeding 150%. Today, professional loan businesses that offer yearly interest rates from 30% to 50% are commonplace. 

According to North Korean defectors, the interest rates of private loans differ widely because the rates are usually determined by the credit level of the borrower.

North Korea has no commercial banks and individuals are generally ineligible from receiving loans from existing banks. Although private loans are technically prohibited, the practice lives on in a legal gray area. 


Daily NK sources suggest that when business loans operating in this legal gray area dry up, the entire economy loses its vigor. 

“Salespeople who travel around by car to sell their wares and distributors who use trucks are anxiously waiting for January to pass [so they can get loans for their businesses],” one source told Daily NK.

“There’s a lot of business people who are saying ominously that the start of 2020 is much more sluggish business-wise than last year,” he added.

*Translated by Violet Kim

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