North Korea’s informal lending networks may lead to gang violence, study finds
February 26 (UPI) – An informal network offering mortgage loans operates in North Korea, and conflicts between lenders and borrowers lead to the deployment of gang members, according to a new South Korean study.
In a report published Friday in the North Korea Economic Review of the Korea Development Institute, Professor Yang Mun-su of the Seoul University of North Korean Studies said that North Korea’s private finance system does not was not well developed, but that residential real estate could be listed as collateral in informal lending networks, Yonhap reported.
Yang’s study indicates that North Korea’s state ownership system coexists with an informal or underground economy dominated by a relatively affluent entrepreneurial class.
Almost all housing is owned by the state in the Kim jong un regime, with the exception of houses built before 1950, according to the Korean service of Radio Free Asia on Friday.
Yang said mortgage loans for houses were offered by North Korean entrepreneurs, known as “donju”.
The donju, or “masters of money”, do not finance home ownership, which is prohibited, but rather the acquisition of housing permits. Previous South Korean news reports have stated that North Korean buyers and sellers can exchange their “right of residence” for housing units.
The informal nature of mortgage lending in North Korea means that borrowers and lenders are unprotected and cannot seek legal redress. In the worst case, a borrower unable to repay a loan will refuse to vacate the home offered as collateral, paving the way for litigation without mediation.
“Ultimately, there is no choice but to resolve the issue through negotiations among North Korean residents, and sometimes through the use of force,” Yang said. “In North Korea, these moneybenders sometimes hire gangs” to deal with uncooperative borrowers.
North Korea’s moneybenders may have become indispensable to regime-building efforts.
In his June 1, 2020 Korean Workers’ Party diary, Rodong Sinmun reported that the North Korean leader thanked the workers and “managers.” The article most likely referred to members of the donju class, who provided capital for construction in Samjiyon County, according to Yonhap’s analysis.