COVID-19 Boosts SME Loans by 88 Trillion Won in One Year... 300,000 Jobs Disappear

Outstanding Loans of SMEs at Banks Reach 804.6 Trillion KRW, Up 12.3% YoY
297,000 Jobs Lost in Companies with Fewer Than 300 Employees
Fortunately, Exports Hold Up... Startup Companies Also Increase

[Asia Economy Reporter Lee Junhyung] Due to the impact of COVID-19, the loan balance of small and medium-sized enterprises (SMEs) has increased by nearly 88 trillion won over the past year, and approximately 300,000 jobs have disappeared.

According to the "Changes in the Management Environment of SMEs and Implications Due to COVID-19" report released by the Small and Medium Business Research Institute on the 25th, the bank loan balance of SMEs last year was 804.6 trillion won, an increase of 87.9 trillion won (12.3%) compared to the previous year (716.7 trillion won).

During the same period, the loan balance growth rate rose from 7.1% in 2019 to 12.3%. The SME Fund Condition Index (BSI) was 66.3, down 6 points from 72.3 the previous year. A BSI below 100 indicates a deterioration in funding conditions.

Trends in Bank Loan Balances by Type of Enterprise.
Photo by Korea Small Business Institute

Jobs turned to a declining trend for the first time in 11 years since 2009. The number of employees in SMEs with fewer than 300 employees last year was approximately 24.23 million, a decrease of 297,000 (1.2%) compared to about 24.53 million the previous year.

The job losses were particularly notable in face-to-face service industries hit hard by COVID-19. The wholesale and retail trade sector lost 154,000 jobs, and the accommodation and food service sector lost 150,000 jobs. The youth population aged 29 and under also decreased significantly by 207,000. The number of temporarily furloughed workers increased by 406,000 over one year, reaching 750,000.

The production index declined in both manufacturing and service sectors. Last year, the production index for small-scale manufacturing was 94, down 4.2 points from 98.2 the previous year, and 16.3 points lower compared to large enterprises (110.3). The production index for small-scale service industries was 103.8, down 4 points from 107.8 the previous year.

Export Trends by Type of Enterprise. [Photo by Korea Small Business Institute]

Exports fared better. Last year, SME export value was 100.7 billion dollars (approximately 112.53 trillion won), a 0.2% decrease compared to 100.9 billion dollars the previous year. Considering that large enterprises’ exports decreased by 7.5% and mid-sized enterprises’ exports by 4.2%, this is regarded as a relatively good performance.

The number of startup companies also increased. Last year, the number of startups was about 1.485 million, an increase of 200,000 (15.5%) compared to 1.285 million the previous year. Technology-based industries and service sectors increased by 3.8% and 17.9%, respectively, while manufacturing decreased by 4.6%.

No Minseon, head of the Future Strategy Research Group at the Small and Medium Business Research Institute, said, "The bank loan balance of SMEs is increasing by 1% every month," adding, "Measures need to be sought to respond to the worsening funding conditions of SMEs." No also suggested, "To enhance the survival capability of SMEs, it is necessary to strengthen support for business restructuring and industry transformation," and "We should also consider providing subsidies when companies achieve the government's policy goal of maintaining employment."

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