[2020 National Audit] Special Guarantee for Small Business Owners Without Low Credit... "Only 2.7% of Support Funds for Grade 7 or Below"

Kim Kyung-man, Member of the Democratic Party of Korea. Photo by Office of Rep. Kim

[Asia Economy Reporter Moon Hyewon] The Ministry of SMEs and Startups has supported special guarantee loans amounting to 14 trillion won over the past five years for small and medium-sized enterprises (SMEs) and small business owners. However, it has been revealed that support for livelihood-type micro-business owners who urgently need financial assistance remains low.

According to data submitted by the Ministry of SMEs and Startups to Kim Kyung-man, a member of the National Assembly’s Industry, Trade, Energy, SMEs and Startups Committee from the Democratic Party of Korea, the Ministry and regional credit guarantee foundations have provided 14.0781 trillion won (547,093 cases) in support through special guarantee projects over the past five years. Among these, the amount supported for low-credit borrowers rated 7 or below was only 376.9 billion won (30,665 cases), accounting for just 2.7% of the total.

In particular, for the ‘COVID-19 Damage Support Special Guarantee’ aimed at small business owners whose business conditions have worsened due to the COVID-19 pandemic, the amount supported up to July this year was 8.7394 trillion won (319,353 cases). Of this, 6.2101 trillion won (71.1%) was allocated to the top credit grades (1 to 3), while the share for the lowest grade (7 or below) was only 157.7 billion won (10,251 cases), representing 1.8% of the total.

Additionally, the ‘Export Company Support Special Guarantee’ for export companies facing business difficulties provided only 1.82% of its total support to low-credit borrowers, amounting to 1.02 billion won. For the ‘Minimum Wage Business Difficulty Support Special Guarantee’ aimed at small enterprises and small business owners struggling with labor costs, only 9.494 billion won (0.56%), less than 1% of the total support amount of 1.6805 trillion won, was provided to low-credit borrowers.

It was found that 54,261 applications for special guarantees were rejected. Excluding ‘voluntary withdrawal’ (41,891 cases), the most common reason for rejection was ‘exceeding the limit’ with 6,551 cases, followed by ‘holding delinquency or other negative information’ with 3,454 cases. This raises questions as to whether support was effectively provided based on credit ratings, contrary to the original intent of supporting regardless of credit grade.

Assemblyman Kim said, “Due to the lack of effectiveness of the current special guarantee system, only people with low credit ratings are suffering,” and added, “The focus of special guarantees should be shifted to medium- and low-credit borrowers to strengthen the financial safety net and prevent the exclusion of citizens from financial transactions.”

This content was produced with the assistance of AI translation services.