This study surveys the current status and issues of the small and medium business (SMB) finance system in Korea in light of the changes in the financial environment at large. It also suggests future goals and improvements. The continued trade surplus in the Korean economy has made it possible for savings to exceed investments, while increasing competition to lower the interest rates and prices throughout the financial sector amid the tide of financial liberalization. The diversification of financial products and services has also enlarged the range of options that businesses can choose from as they look for additional financial resources.
The direct financial and securities intermediary services were introduced into the Korean financial market during the 1980s. The amount of government supplies via the securities market significantly increased from 14.8 percent in the 1970s to 22.6 percent in 1988 thanks to the policy of fostering the securities and capital market. The rapid growth of non-monetary financial institutions also multiplied the proportion of businesses funding their activities via purchases of marketable securities, up from 3.3 percent in the 1970s to 14.7 percent by 1988. Korean SMBs trying to secure additional financial resources still largely depend on loans from banks and inter-corporation credit. The expansion and diversification of financial services have eluded SMBs, which, unlike large corporations, still have to struggle with obtaining loans from general financial institutions and issuing new shares on the capital market. The growth of these businesses therefore cannot depend solely on the market mechanism. The government needs to introduce an effective complementary policy.
In order to ensure the growth of SMBs in the future, the government needs to make a series of changes including: the creation of financial institutions specializing in SMB clients; the expansion of the funds for equipment installation and technological development; the development of the main sources of capital for venture capital companies and the creation of venture business support centers; the introduction of the movable asset collaboration system via the Central Register Disclosure Program; the expansion of the Credit Guaranty System; the activation of financial markets other than stock exchanges; and the increase in the amount of fiscal support provided to SMBs.
중소기업금융제도의 발전방향(How to promote the growth of the SMB finance system)
|Series Title; No||정책연구시리즈 / 89-10|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Entrepreneurship|
|Holding||KDI; KDI School|