NongHyup Audit Sparks Clash Over Direct Election and External Audit Body as “Government Control”... Lawmakers Rebuke 5.45% Delinquency Rate at Agricultural and Livestock Cooperatives

According to the ‘status of loans and delinquencies at regional agricultural·livestock cooperatives’ submitted by the NongHyup National Agricultural Cooperative Federation to Democratic Party lawmaker Lee Jae-kwan(Cheonan B, South Chungcheong), the delinquency rate at regional agricultural·livestock cooperatives rose every year from 1.21% in 2022 to 2.74% in 2023, 4.03% in 2024 and 4.61% in 2025. In August 2026, it soared to 5.45%. The number of agricultural·livestock cooperatives unable to pay dividends to members also increased from 8 in 2021 to 107 in 2025. Added to this were allegations of money and valuables surrounding the chairman’s election and misconduct uncovered in a special joint government audit. The government and ruling party are pushing to revise the NongHyup Act, centered on introducing a direct election by members for the federation chairman and establishing an external independent audit body.

At the National Assembly audit of the National Agricultural Cooperative Federation and others conducted on the 16th by the Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee(Agriculture Committee·Chairman Seo Sam-seok), the ruling and opposition parties clashed head-on over this reform plan. The opposition raised concerns over ‘government control’ and ‘damage to cooperative principles’, while the ruling party countered that NongHyup itself had brought on the need for reform. However, both parties spoke with one voice on the insolvency of mutual finance, and criticism also focused on close-associate appointments and opacity in fund allocation. The audit targets that day were seven institutions: the NongHyup National Agricultural Cooperative Federation, NongHyup Agribusiness Group, NH Financial Group, NH Bank, NH Life Insurance, NH Property & Casualty Insurance, and the Korea Racing Authority. NH Financial Group Chairman Lee Chan-woo did not attend, citing his participation in the annual meetings of the International Monetary Fund(IMF)·World Bank(WB).
 

 Direct election accepted, but external audit body sparks ‘government control’ debate

NongHyup National Agricultural Cooperative Federation Chairman Kang Ho-dong said in a business report that he had actively accepted the direct election system by members. He explained that self-reform measures, including the introduction of an independent director system and restrictions on reemployment of retirees, had also been proactively reflected in the articles of association. But he drew the line at an external independent audit body. In response to a question from People Power Party lawmaker Kim Yong-tae(Pocheon·Gapyeong, Gyeonggi), Kang answered, “It is true that the parts concerning NongHyup’s autonomy and independence, such as improving internal governance and establishing an audit body externally, are what worry me most”. He also added that he understands creating a new body would cost an additional 100 billion to 150 billion won.

Kim pointed out that in the Ministry of Agriculture, Food and Rural Affairs’ audits of NongHyup from 2021~2025, there was not a single measure taken against executives under Article 162 of the NongHyup Act(discipline·warning·caution). Yet in this year’s special audit, 19 dispositions against executives and employees, including 7 measures against executives, emerged all at once, he explained. Kim pressed, “If it is true there were problems all along, wasn’t the Ministry of Agriculture derelict in its duties over the past 5 years?” Articles 163·164 of the NongHyup Act stipulate strong ministerial supervisory powers, such as canceling resolutions of general meetings·boards of directors and suspending executives from duty. Kim said these powers had not been exercised once in the past 5 years and urged the ministry to use its existing authority first.

People Power Party lawmaker Lee Sang-hwi(Pohang South·Ulleung, North Gyeongsang) likened the revision of the NongHyup Act to the situation involving the Korea Communications Commission. He argued that while the stated purpose is to strengthen transparency, the actual structure is moving toward government control over NongHyup’s capital and personnel authority. People Power Party lawmaker Lee Yang-soo(Sokcho·Inje·Goseong·Yangyang, Gangwon) expressed concern that introducing direct elections would expose the federation chairmanship to political winds. He also warned that if an external audit body focuses only on management efficiency, return projects for cooperatives could be cut off. Lawmaker Kang Seung-kyu of the same party(Hongseong·Yesan, South Chungcheong) said the members of the federation are regional agricultural cooperatives, criticizing that giving direct voting rights to individual cooperative members who are not federation members does not fit the legal coherence of a cooperative.

The ruling party pushed back. Democratic Party lawmaker Lim Mi-ae(proportional representation) said, “The starting point of this reform is not the government but NongHyup itself”. She cited as grounds that financial accidents at agricultural·livestock cooperatives reached 96.1 billion won over 5 years, and that half of embezzlement cases were uncovered through external tip-offs rather than internal audits. Lim explained that the Ministry of Agriculture’s special audit late last year and the government-wide joint audit early this year were precisely exercises of the minister’s guidance·supervisory authority. As a result, she said, 65 improper cases were confirmed and 14 were referred for investigation. Lim refuted the claim that the government was taking control of NongHyup, saying it would mean “letting 1.87 million cooperative members directly elect the chairman who used to be chosen by 1,100 cooperative heads”.

Rebuilding Korea Party lawmaker Shin Jang-sik(proportional representation) introduced that Japan’s agricultural cooperatives and Germany’s Raiffeisen cooperatives also have audits conducted by independent legal entities. He criticized that independence·autonomy is a principle for audit institutions, not freedom from being audited. Kang countered, “I cannot agree with the idea that we must receive external audits because the chairman or executives have not been audited”.

The process of discussing reform also came under scrutiny. Kim Yong-tae pointed out that the Ministry of Agriculture’s NongHyup Reform Promotion Task Force left only discussion reports, without meeting minutes. He said only two members of the federation’s NongHyup Reform Committee supported direct elections. Kang explained that after the president mentioned direct elections at a Cabinet meeting as a way to restore member sovereignty, he accepted it with the consent of an emergency committee made up of 60 cooperative heads. He also acknowledged that in an initial opinion poll of cooperative heads, about 80% opposed it. Regarding the 40 billion won cost of direct elections, he said he had asked the government to reimburse it on a basis equivalent to publicly managed elections.
 

Chairman’s legal risk·suspicions over reemployment of close associates…“If there is a problem, I will take responsibility”

Questions targeting Chairman Kang personally also continued. Shin Jang-sik brought up the case in which 2 secretariat employees were arrested over allegations that expensive commemorative items worth 240 million won were delivered to the chairman’s office·vice chairman’s office. When asked whether he had instructed or conspired in it, Kang answered, “No”. To the demand that he step down as chairman and undergo investigation, he said, “I cannot agree”. Answering a question from Lim Mi-ae, Kang said the legal risk surrounding him that had continued for more than 1 year seemed to have opened the door to NongHyup reform. He added, “I have repeatedly said that if there is a problem, I will take responsibility”.

Lawmaker Yoon Jun-byeong questioned the sincerity of the personnel renewal carried out after the public apology in January. Former executive vice president Ji Jun-seop was reemployed in May as an adviser at SamjongKPMG Economic Research Institute. Yoon presented an audio recording of remarks by former executive vice president Ji to the effect that he had obtained the adviser post with help from the chairman. Kang denied it, saying, “I never asked directly”. 

In the questioning of Kim Jin-cheol, director of management support at the Farmers Newspaper, who appeared as a general witness, problems in the process of appointing the president were revealed. It was confirmed that the list of 54 candidates was prepared and passed on by the Management Support Bureau, not by the Executive Recommendation Committee. Yoon also mentioned that former executive vice president Yoo Chan-hyung, a close associate of Kang, had been recommended as a candidate for president of the Farmers Newspaper but was rejected by the board of directors. In response, Kang said, “I was not the one who made the recommendation”.

Yoon pointed out that retired executives subject to employment restrictions were not properly undergoing employment screening by the Public Service Ethics Committee. He criticized NongHyup for rendering the employment screening system itself ineffective, saying former executive vice president Yoo Chan-hyung was also reemployed without screening. He said the personnel changes carried out while pledging reform had ultimately been only for show. When Yoon asked how the chairman could not even know that much, Kang retorted, “What authority does the chairman have?” and voices were raised. 

Democratic Party lawmaker Joo Cheol-hyun(Yeosu A, South Jeolla-Gwangju) rebuked ‘protecting one’s own people’. Since 2022, he said, 6 disciplinary cases involving executives and employees with clear criminal suspicions had ended without complaints being filed. Joo said one NongHyup in Geoje did not file a complaint against a Hanaro Mart employee who embezzled 130 million won, and even paid the employee 100 million won in honorary retirement pay before letting them go.
 

Unallocated budget at 60%…interest-free funds rise 44% in South Gyeongsang but 5.1% in North Jeolla

Yoon Jun-byeong criticized that unallocated budgets account for 60% of the federation’s budget, becoming an unofficial slush fund for management. According to Yoon, the amount diverted from production guidance expenses and the like into publicity costs over the past 3 years reached 19.5 billion won. Yoon claimed that 100 million won of this was used to block articles about suspicions that the chairman accepted money and valuables, and that this was also pointed out in the special joint government audit.

The allocation of interest-free support funds to member cooperatives also became an issue. According to Yoon, interest-free funds increased from the 13 trillion won range in 2023 to 15 trillion won this year. During the same period, allocations to North Jeolla rose only 5.1% , but South Gyeongsang, Kang’s home region, increased by 44% . There were 20 cooperatives receiving more than 40 billion won in support, and among 14 federation directors, 8 of their cooperatives were allocated more than 20 billion won. Democratic Party lawmaker Moon Geum-joo(Goheung·Boseong·Jangheung·Gangjin, South Jeolla-Gwangju) also demanded greater fairness, saying interest-free funds had been concentrated in North Gyeongsang·South Gyeongsang since Kang took office. Kang explained that large-scale support of more than 40 billion won consisted of merger support and facility funds for offices·Hanaro Marts and the like.
 

 Mutual finance delinquency rate among nonmembers at 7.46%…one voice on insolvency in joint loans

The soundness of mutual finance was a common concern for both ruling and opposition parties. According to Democratic Party lawmaker Lee Gae-ho(Damyang·Hampyeong·Yeonggwang·Jangseong, South Jeolla-Gwangju), among 385 trillion won in mutual finance loans, the delinquency rate for cooperative members was 2.46%, while the rate for nonmembers was 7.46%, about three times higher. Of the estimated losses in the 1.3 trillion won range, 59% came from loans to nonmembers, and if associate members are included, the share reaches 90.7%. In particular, the delinquency rate on joint loans linked to real estate project financing(PF) is 17.5%. Lee pointed out, “It is difficult to say normal finance is being conducted”. He also proposed lowering the current joint-loan screening threshold of 7 billion won and introducing a system that issues an alert when delinquency rates exceed a certain level. Kang answered that NongHyup is responding through support via an asset management company and the creation of a 500 billion won nonperforming-loan fund.

Lee Jae-kwan said more than 8 trillion won of the 17 trillion won in joint loans was concentrated in Seoul metropolitan-area real estate, and that the delinquency rate on these loans exceeds 30%. Lee argued that the cause of insolvency should be found not in falling farmland prices but in failed financial management. He also disclosed that among 76 agricultural·livestock cooperatives that posted deficits last year, 64 cooperatives(84.2%) paid executive performance bonuses this year. Uiseong NongHyup, which had been unable to pay dividends for two consecutive years, paid 80 million won in retirement merit money to its cooperative head during the merger process.

Lee also took issue with loans related to affiliates. Mutual finance lent 100 billion won to the Banwol logistics center PF, and after completion, a NongHyup affiliate is contracted to lease and use the building for 5 years while paying 62 billion won in rent. He also pointed to an unsecured 30 billion won loan to Capital A and the NongHyup Foundation’s purchase of commercial paper(CP). Lim Mi-ae elicited an answer from Yoon Sung-hoon, CEO of mutual finance at the NongHyup National Agricultural Cooperative Federation, that there is no separate procedure to inspect loans in which the tenant is a NongHyup affiliate. Lim demanded that screening standards be supplemented quickly, as the money belongs to member cooperatives.

Democratic Party lawmaker Song Ok-joo(Hwaseong A, Gyeonggi) said the number of grade 1 mutual finance cooperatives decreased from 802 cooperatives(72%) to 482 cooperatives(43.5%). During the same period, grade 3~5 cooperatives increased from 5 to 66. Song pointed out that insolvent cooperatives, which started in North Gyeongsang, have spread through South Chungcheong·Sejong·South Gyeongsang·Gyeonggi and recently to Busan·Ulsan·Incheon.

Interpretations differed over the impact of the full farmland survey on insolvency. According to People Power Party lawmaker Lee Seong-kweon(Saha A, Busan), farmland transactions from February to August this year decreased by 9,134 cases from the same period last year, and overdue farmland-collateralized loans increased by 163 billion won. Losses on nonperforming loans also more than doubled from 9.8 billion won to 22.6 billion won, and insolvent NongHyup cooperatives numbered 44. Even so, NongHyup is instead raising loan hurdles, Lee said, urging that the hurdles be lowered again. People Power Party lawmaker Kim Sun-kyo(Yeoju·Yangpyeong, Gyeonggi) pointed out that the increase in delinquency rates from April to August, when the full survey began, was 0.52% points, which is 1.8 times the increase during the same period last year(0.29% points). He said NongHyup, which has extended 71 trillion won in farmland-collateralized loans, should demand clear standards from the government. By contrast, Yoon Jun-byeong countered that the deterioration in delinquency rates should not be blamed on the full farmland survey and that the root causes should be examined first.

Debt adjustment for vulnerable groups also came under scrutiny. Lim Mi-ae criticized that the utilization rate of debt adjustment at the agricultural·livestock cooperative level is only 3.1%, making the system virtually nominal. She also pointed out that the debt-adjustment information is not noticeable in notices of impending loss of benefit of time sent to delinquent borrowers. Lim proposed directly informing elderly farmers aged 70 or older and young farmers by phone, and checking whether borrowers belong to vulnerable groups at the lending stage. 

Financial group dividends at 760 billion won, agribusiness group at ‘0’…calls for Hanaro Mart’s role

Polarization between the financial and economic divisions was also pointed out. According to Song Ok-joo, NH Financial Group’s dividends rose from 675 billion won in 2023 to 760 billion won this year, and agricultural support project expenses rose from 492.7 billion won to 693 billion won. By contrast, NongHyup Agribusiness Group had not a penny in dividends during the same period. Even so, agricultural support project expenses(brand-use fees) paid by affiliates to the federation increased from 47.6 billion won to 57.2 billion won. Song demanded measures for loss-making affiliates. People Power Party lawmaker Cho Seung-hwan(Jung-gu·Yeongdo-gu, Busan) argued that finding ways to channel financial group profits toward economic businesses is substantive NongHyup reform.

In distribution, there were calls for NongHyup to expand its role. Song pointed out that the annual sales in 2025 of more than 2,100 regional NongHyup Hanaro Marts nationwide were 13 trillion won, higher than Emart, the No. 1 hypermarket chain(11 trillion 900 billion won). She ordered improvements to the problem that government support for agricultural product discount coupons is concentrated on large marts, and urged legal revisions to allow Hanaro Mart to enter major cities. Democratic Party lawmaker Moon Dae-lim(Jeju A, Jeju) said the federation should step forward to ensure a soft landing for the online wholesale market, whose results without real transactions have become controversial. To that end, he proposed making Jeju tangerines a pilot item.

Shin Jang-sik pointed out that 12 agribusiness group wholesale markets and 33 cooperative wholesale markets do not pay shipment incentives on 748.6 billion won worth of shipments from individual farms. Seoul’s Garak Market pays 0.45% regardless of who the shipper is. Joo Cheol-hyun criticized that the domestic fertilizer business of Namhae Chemical, a NongHyup affiliate, posted a 27.9 billion won deficit last year because NongHyup sets delivery prices below cost.
 

On rumors of NongHyup’s regional relocation, Chairman Kang says “There has been no concrete discussion or plan”

Lee Sang-hwi raised suspicions that the Ministry of Land, Infrastructure and Transport is internally reviewing NongHyup’s relocation. According to Lee, there is talk that the federation and agribusiness group would be relocated to Naju, South Jeolla-Gwangju, financial affiliates to Busan, and the financial investment division to Jeonju, North Jeolla. He pointed out that NongHyup has already invested about 1.5 trillion won to secure financial hubs in downtown Seoul, and that relocation would cost an additional 250 billion won according to labor union estimates. He also cited that 73% of 96,000 NongHyup Group executives and employees already work outside Seoul, and that according to union estimates, among 1,167 employees at the central headquarters, only 460 could actually be relocated. Kang answered, “So far, there has been no concrete discussion or plan”. In response to a question from Kim Sun-kyo, he also said there had been no official request or consultation from the government. Kang emphasized that even if relocation is pursued, opinions must be collected from members, cooperative heads, and executives and employees, and the matter must go through the board of directors and the general meeting of delegates.

Chairman Seo Sam-seok concluded the audit by saying, “NongHyup reform is something that cannot be avoided, but whatever form it takes, it cannot take precedence over farmers’ interests”. The Agriculture Committee will again review unsubmitted NongHyup-related materials and follow-up measures at the comprehensive audit on the 22nd.