"We set up the loans to benefit a large group of people through low interest rates, which inevitably concentrated the benefits for people in credit tiers 6 to 7," an official said. "The negative impact was that people in tiers 8 to 10 consequently were pushed out from the loan programs to resort to private lenders."

The country's credit ratings runs from one to 10, with higher numbers meaning worse scores.

Data from the Korea Credit Bureau showed that among the borrowers of these special loans in 2016 and 2017, 39.3 percent were in tier 7 and 23.6 percent in tier 6. The number of people in tier 8 was much lower, at 13.1 percent. Tier 9 accounted for just 1 percent.

Separate data show that 75 percent of borrowers from private lenders are in tiers 7 to 10.

Officials said the proposals were reported to the presidential office late November and received verbal approval. (Yonhap)