Japanese lenders have taken up more than half of the market in South Korea for small, private lending, even though they charge significantly higher interest rates than local competitors, market watchers said Sunday.

As of the end of last year, the number of Japanese lenders in the country's secondary financial market was 21.

However, combined lending by the Japanese-owned financial institutes came to about 4.97 trillion won (US$4.66 billion), or 56.2 percent of the total in the small, private lending market, while total lending by 74 local firms came to some 3.56 trillion won, according to the market watchers.

"The Japanese lenders relatively have a competitive edge as they are able to bring in vast amounts of funds at lower interest rates," an observer said on condition of anonymity.

However, loans from Japanese lenders carried an average annual interest rate of 36.8 percent in 2013 while loans by local lenders had an average rate of 27.8 percent.

The market observers said the growing market share of Japanese lenders can be attributed to the high number of private customers seeking short-term loans.

In 2013, 95 percent of loans from the 21 Japanese lenders were credit-based loans to individuals while the rate for local firms stood at 65.3 percent. (Yonhap)