Mid-sized Enterprises Propose Financial System Advancement Tasks for Management Stability and Investment Activation

Seminar on Advanced Financial System Measures for Business Stability and Investment Activation

[Asia Economy Reporter Kim Cheol-hyun] To successfully respond to the changing economic environment in the post-COVID-19 era, it is necessary to acknowledge the rigid market failures in the current financial sector for mid-sized companies and urgently improve them to properly support the "backbone" of the South Korean economy, experts said. Jo Byung-seon, President of the Korea Institute for Mid-sized Enterprises, stated this on the 29th at the 'Financial System Advancement Plan for Stabilizing Management and Activating Investment of Mid-sized Companies' seminar held at the Seoul Mapo Listed Companies Hall, pointing out that "Although finance is an essential condition for corporate innovation and growth, many mid-sized companies have long been neglected in the blind spots of financial policies."

The seminar, jointly hosted by the Korea Federation of Mid-sized Enterprises, the office of Democratic Party lawmaker Kim Byung-wook, the Korea Institute for Mid-sized Enterprises, and the Korea Association for Mid-sized Enterprises Studies, featured keynote presentations by Jo Byung-seon, Kim Pil-gyu, Senior Research Fellow at the Korea Capital Market Institute, and Kim Young-jin, Head of Loan Planning at KDB Industrial Bank, followed by expert discussions on practical institutional improvement measures to lead the advancement of the financial system as a fundamental infrastructure for the development of mid-sized companies.

On this day, President Jo emphasized, "Considering the high contribution of mid-sized companies as the backbone of the Korean economy, the advancement of the financial system for mid-sized companies is not just about the development of a specific group of companies but igniting a new engine to drive the development of the South Korean economy," adding, "Given the market failures that are prominent in mid-sized company finance, effective improvement measures must be urgently prepared to resolve difficulties in stable management and investment fund procurement."

President Jo particularly defined the financial realities that fail to reflect the characteristics of mid-sized companies, which require aggressive investment to expand new growth engines, as 'market failures' and urged related institutional improvements. He stated, "Under the current system, many mid-sized companies with credit ratings of BB or lower, including small-scale and low-credit early-stage mid-sized companies, face serious difficulties in raising funds without additional collateral or credit enhancement in the financial market."

In response, President Jo proposed financial system improvement tasks to support the management stability and investment activation of mid-sized companies, such as expanding credit guarantees to compensate for their weak creditworthiness. Key tasks include establishing a control tower to resolve financial difficulties and advance the financial system for mid-sized companies to prevent their exclusion from financial policies. He suggested concrete measures such as creating a 'Mid-sized Company Financial Difficulty Resolution Committee' as a special committee under the Ministry of Trade, Industry and Energy's 'Mid-sized Company Policy Committee' and setting up and operating a dedicated organization within the ministry. He also emphasized the need to include early-stage mid-sized companies with sales under 300 billion KRW in policy finance support to strengthen their international competitiveness.

President Jo explained, "To effectively finance the majority of mid-sized companies with low credit ratings and weak collateral, expanding credit guarantees for mid-sized companies is essential," adding, "The guarantee limit per company should be raised from the current 3 billion KRW to 50 billion KRW, and early-stage mid-sized companies should be prioritized for credit guarantee support, improving the credit guarantee system to reflect reality."

He also stressed the necessity of introducing a mid-sized company support guarantee ratio system that allocates mid-sized company guarantees within 20% of the total guarantee amount of credit guarantee institutions. President Jo said, "It is necessary to establish a special fund exclusively for mid-sized companies to ensure that the expansion of credit guarantees for mid-sized companies does not reduce guarantee capacity for small and medium enterprises, small business owners, and self-employed individuals," emphasizing, "This would be the most effective and realistic measure to resolve financial difficulties for mid-sized companies."

More specifically, President Jo proposed creating a 500 billion KRW dedicated guarantee fund for mid-sized companies to be contributed as basic assets to credit guarantee institutions, thereby strengthening credit guarantees for mid-sized companies. He said, "Considering the leverage effect of credit guarantees and the use of partial guarantee systems, operating a 500 billion KRW mid-sized company guarantee fund could enable an additional loan supply of about 13 to 15 trillion KRW to mid-sized companies," adding, "It is worth actively considering a joint burden plan involving the government contributing 300 billion KRW, special contributions of 100 billion KRW from the banking sector, and 100 billion KRW from mid-sized companies’ insurance premiums and credit guarantee institutions’ retained earnings."

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