South Korea will launch a microfinance scheme on Tuesday to provide North Korean refugees with low-interest business loans, officials said.

The Unification Ministry, which is in charge of cross-border relations, said the programme would help North Korean refugees better adapt to the South's capitalist society.

The ministry, which is launching the initiative in conjunction with automaker Hyundai Motor, will select applicants in August, a spokesman said.

"We hope our programme will provide a meaningful first step to North Korean defectors," Unification Minister Hyun In-Taek told reporters.

The programme allows North Korean refugees to receive loans from Hyundai Motor's Smile Microcredit Bank.

Microfinance, which aims to provide finance to people with low credit rating and little access to banks, gained global attention after the success of 2006 Nobel Peace Prize winner Muhammad Yunus' Grameen Bank in Bangladesh.