Authorities in North Korea are forcing residents in parts of South Pyongan province to open bank accounts as part of a mandated savings plan that will simultaneously secure funds for the local government and tighten control over the public.
Sources say that residents must deposit funds to the accounts on a regular basis and must receive government approval to make withdrawals.
A resident of South Pyongan province told RFA’s Korean Service Thursday that passbooks for commercial bank accounts were distributed to each household in the city of Sunchon shortly after the New Year.
“Starting this month, residents must save money in their new bank accounts every month. The [Korean Workers’] Party says the minimum amount we must deposit is 1,000 North Korean won (U.S. $0.12),” said the source.
“They said 5,000 won ($0.62) would be ‘nice’ and that we should be more conscientious about how much we are saving. The interest rate for these accounts is 10% each year,” the source added.
The source said the policy’s purpose is to provide capital to the local government and government controlled industries.
“[The accounts] are aimed at expanding the deposit reserves of the commercial banks. Funds [they] collect will be distributed for the operation of state-run factories and used to revive the local economy,” the source said.
The source said that most people are not happy about the policy, which was conceived by the city’s party committee.
“The residents aren’t saving [in the accounts] so the leader of the local Inminban [neighborhood watch unit] must go around to every house to forcibly collect the savings, then deposit them in the bank,” the source said.
“Although the savings can be withdrawn at any time, customers must have the permission of the inminban leader to do it. It’s really just a way for the government to have more control over us while getting funds for the banks,” the source added.
A second source, also from South Pyongan, told RFA on the same day that the commercial banks are failing to achieve their purpose.
“The commercial bank here in South Pyongan was established in 2016 and has been in operation since 2017,” the second source said.
“In Pyongsong, where there are many wealthy people, the bank’s strategy was to use the deposits of the rich to lend to the state-run companies and collect interest. But now the bank is in a bad spot,” the second source added.
The source said the strategy was not working because of rules on who can borrow from them.
“Unlike the central bank, commercial banks were established to allow the state to suck in funds from the people and lend money for local economic activities at high interest. But the rules say that the money can only be lent to state-run companies and loans are banned to people who want to make private fortunes in things like real estate.”
“The result is that these banks have little to no impact on revitalizing the local economy,” the second source said.
“Meanwhile the high-rollers who need money to make more money can only tap into the private financial market, where interest rates are high and funds are collected quickly, but they are at least available.”
Sanctions have also put the squeeze on the commercial banks, according to the second source.
“In response [to sanctions] the Central Committee [of the Korean Workers’ Party] is opening the commercial banks to the city level and encouraging people to save money by offering high interest rates,” said the second source.
“But who believes what the party says? We cannot trust the authorities and the banks, because people have been denied their savings for decades under many different pretexts,” said the second source.
South Korean broadcaster KBS reported that North Korean banks are responsible for controlling the overall economy and managing funds for the North Korean leadership.
According to the North Korea Information Portal operated by South Korea’s Unification Ministry, the North Korean government has also taken temporary measures to deal with cash shortages, such as issuing public bonds, exchanging money, and restricting personal cash holdings.
Reported by Hyemin Son for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Eugene Whong.