SME Trade Credit Protector 'Accounts Receivable Insurance' Surpasses 200 Trillion Won

[Asia Economy Reporter Junhyung Lee] The Ministry of SMEs and Startups announced on the 13th that the cumulative underwriting amount of accounts receivable insurance has surpassed 200 trillion won.

Accounts receivable are claims arising from a company's sales of goods. It refers to "credit sales payments" such as accounts receivable and notes receivable. Accounts receivable insurance is a system that pays insurance benefits when small and medium-sized enterprises (SMEs) suffer losses from credit transactions, preventing chain bankruptcies and expanding transaction safety nets. The government introduced it in 2004, and it is operated on consignment by the Korea Credit Guarantee Fund.

SMEs subscribed to accounts receivable insurance can be guaranteed up to 80% of unpaid amounts due to client bankruptcy or delayed payment of accounts receivable. SMEs can stably collect sales payments and reduce the risks of credit transactions through accounts receivable insurance.

Trend of cumulative underwriting amount of accounts receivable insurance.
[Photo by Ministry of SMEs and Startups]

The cumulative underwriting amount of accounts receivable insurance rapidly increased after surpassing 56 trillion won in 2013. It reached 100 trillion won in 2016 and exceeded 200 trillion won at the end of last month. The annual underwriting amount has also reached about 20 trillion won every year since 2018.

This year, the Ministry of SMEs and Startups plans to underwrite more than 20 trillion won in accounts receivable insurance. It is also promoting measures to expand the transaction safety net for SMEs and activate substitute means for promissory notes. To improve companies' accessibility to the accounts receivable insurance system, a foundation is being established to allow commercial banks to conduct accounts receivable insurance solicitation agency work. The ministry also operates a cooperative insurance product linked with local governments called "Local Government Cooperative Insurance."

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