Ministry of SMEs and Startups Acquires 20 Trillion KRW in Accounts Receivable Insurance to Support SMEs in Collecting Trade Receivables

Focused Initiatives Including Development of COVID-19 Affected Business Support and Non-Face-to-Face Integrated Support Service App

[Asia Economy Reporter Kim Heeyoon] # Industrial cable manufacturer Company A faced an unexpected bankruptcy crisis in May last year due to the bankruptcy of its trading partner Company B. Company A, which faced a chain bankruptcy crisis due to a large amount of accounts receivable, was fortunately able to overcome the bankruptcy crisis by receiving compensation of 900 million KRW for the accounts receivable as it was insured under accounts receivable insurance.

The Ministry of SMEs and Startups announced on the 28th that it plans to underwrite accounts receivable insurance worth 20 trillion KRW this year to prevent chain bankruptcies caused by losses from accounts receivable of small and medium enterprises and to support management stability.

Accounts receivable insurance is a system that compensates for losses when small and medium enterprises deliver goods or services on credit to their clients and fail to collect payments due to client insolvency. It has been entrusted to the Korea Credit Guarantee Fund by the Ministry of SMEs and Startups since 1997.

The eligible applicants are small and medium enterprises and mid-sized companies with average sales under 300 billion KRW, with a maximum insurance subscription limit of 10 billion KRW per company.

Especially this year, amid ongoing economic uncertainties due to the prolonged COVID-19 pandemic, the plan is to enable more small and medium enterprises to strengthen their safety nets and enhance business competitiveness through insurance subscription.

The project will first support 10% of insurance premiums (worth 500 billion KRW) for affected companies to overcome the COVID-19 crisis, and will also develop and advance a non-face-to-face integrated service app that allows everything from insurance subscription to claims via mobile devices.

Additionally, the plan is to continuously expand local government agreement insurance to support small and medium enterprises located in regions by alleviating insurance premium burdens.

The Ministry of SMEs and Startups is promoting the project so that banks, which are financial contact points for small and medium enterprises, can provide insurance guidance and recommendations.

No Yongseok, Director of Global Growth Policy at the Ministry of SMEs and Startups, said, “We urge active utilization of accounts receivable insurance, which has served as a reliable management safety net for small and medium enterprises for the past 25 years. We will do our best to improve the system in line with the rapidly changing economic conditions after COVID-19.”

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