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Financial Risk of Sole Proprietors in Service Industry

Ju JaeukㆍYun Jongjin

The purpose of this study is to examine the current status and characteristics of individual entrepreneurs who are facing limitations in the service sector in Seoul, and to analyze the economic risk factors. Using loans and delinquent big data from the Korea Credit Information Service, we developed an index that can measure the risks of individual businesses by industry, and identified changes in business risk caused by the spread of COVID-19 and the implementation of social distancing.

Considering the proportion of individual entrepreneurs in business and employment, loan size, and repayment ability, this study examines the retail industry (47), food and pub industry (56), sports and entertainment service industry (91), according to the 10th Korean Standard Industrial Classification (KSIC). Businesses falling into the five middle categories, such as personal and consumer goods repair business (95) and other personal service businesses (96), were defined as 'subsistence-type service business sole proprietors'.

In this study, risk indicators were developed using only information on business loans and delinquency from CreDB, Korea Credit Information Service. After setting the risk indicator candidate criteria and setting various criteria, the time series of the calculated candidate indicators is derived, and similar time series is created using the dynamic time warping method, which is a method of measuring the similarity between vectors with temporal order. Six risk indicators were developed by clustering and selecting representative values ​​of data judged to be economically meaningful and representative among time series by cluster.

The facts from the six indicators are as follows. The economic risks of individual entrepreneurs in the livelihood service industry in Seoul are greatly affected by the policy, and it seems that they are being managed by the current government policy. Some indicators that appear to be good are not a result of business operators' improvement, and may deteriorate again if policy finance is reduced or stopped, so close monitoring is required in the future.