[2021 National Audit] Rep. Kim Han-jung "Need to Revitalize Financing System for SMEs"

Kim Han-jung, Member of the Democratic Party of Korea

[Asia Economy Reporter Song Seung-seop] There have been calls to revitalize the fund circulation system of the Korea Credit Guarantee Fund to support domestic small and medium-sized enterprises (SMEs) struggling with financial difficulties.

On the 15th, Kim Han-jung, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, stated, "While the global factoring market is dominated by non-recourse factoring accounting for more than half, Korea is still in the early stages," emphasizing, "Efforts must be made to activate the market."

Factoring refers to a financial transaction where the purchasing company pays for goods with promissory notes (accounts receivable), and the selling company discounts these receivables at a factoring company to recover funds. In Korea, factoring companies have recourse rights, meaning that if the purchasing company goes bankrupt, the factoring company can claim payment from the selling company, sometimes causing a chain of bankruptcies.

In response, the Korea Credit Guarantee Fund was selected as an innovative financial business under the financial regulatory sandbox in April last year and launched the first public institution pilot project for non-recourse factoring earlier this year. However, support performance until last month amounted to only 11.6 billion KRW, which is minimal.

Assemblyman Kim Han-jung explained, "The non-recourse factoring system handled by the Korea Credit Guarantee Fund provides funding at a low fee of 2-3% based on abundant corporate information," adding, "From the seller's perspective, it has the advantage of early collection of sales proceeds without worrying about chain bankruptcies."

He continued, "The Korea Credit Guarantee Fund's factoring business will be a great help to SMEs facing financial difficulties," urging, "The government and the National Assembly should strive to activate the business through legal improvements such as amendments to the Korea Credit Guarantee Fund Act and budgetary support."

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