This study reviews the role of credit co-operative associations in Korea and determines measures to grow credit co-operative associations into important financial institutions for local small-scale enterprises by expanding the business areas to small-scale enterprises.
As most small-scale enterprises are family-based and aim for a living income, their management resources and technology are poor, resulting in low productivity and weak sales infrastructure. If small-scale enterprises are empowered to achieve high productivity, the following can be expected:
First, these enterprises can flexibly respond to business fluctuations, and this will encourage stable economic growth and may prevent the concentration of economic power—resulting in redistribution of income. Also, as this type of enterprise can be founded relatively easily, they have a high employment effect and may relieve unemployment for unskilled technical workers. Since this type of business is suitable for small-scale production and sales, they may improve the competitiveness of domestic industries by creating production division relationships with large and small- and medium-sized enterprises. Also, as it is easy to specialize business to meet the local environment, the balanced development of local societies is possible.
Therefore, if small-scale enterprises are empowered, they will be able to play a pivotal role in local development. Today, credit co-operative associations have grown, focused on local organizations associations as personal financing institutions. However, as loan subjects have been limited to individual financing, asset management was inefficient. Therefore, expansion of the business areas to small-scale enterprises will contribute to the economic stabilization of small-scale enterprises which have heretofore been excluded from institutional finance systems. These enterprises would not have to obtain capital from private money markets, which would reinforce the local economy.
The economic strategies to expand the business areas of credit co-operative association to small-scale enterprises are as follows: First, creditor cooperative associations should expand loan appraisals to include professional analyses of business strategy and growth potential. Second, efficiently-managed large associations should be provided with a discount to commercial bills for specific lines of credit. Third, economic projects (such as joint purchases of raw materials and joint sales of products) should be encouraged, so as to remove obstacles in production and sales caused from the small scale of these enterprises. Fourth, the lease service for farmers should be expanded to small enterprises. Fifth, the establishment of new business stores should be focused in local associations, including apartment type, factory area, et cetera. Finally, the ability of joint organizations to apply guidance and audits should be improved, and professional risk management experts should be employed.
소영세기업의 육성과 신용협동조합의 역할(Cultivation of small-scale enterprises and roles of credit co-operative associations)
[서울] : 한국개발연구원
|Series Title; No||정책연구시리즈 / 92-16|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Entrepreneurship|
|Holding||KDI; KDI School|