Minister Lee Young Meets Heads of Six Major Commercial Banks to Discuss Support Measures for SMEs and Small Business Owners

Lee Young, Minister of SMEs and Startups

[Asia Economy Reporter Donghyun Choi] On the 24th, the Ministry of SMEs and Startups held the 2022 ‘2nd SME Financial Support Committee’ at the main conference room of the Seoul Foundation of Large and Small Business and Agriculture and Fisheries Cooperation.

The committee was attended by Minister Lee Young of the Ministry of SMEs and Startups, KB Kookmin Bank CEO Lee Jae-geun, Woori Bank CEO Lee Won-duk, Hana Bank CEO Park Sung-ho, IBK Industrial Bank CEO Yoon Jong-won, NH Nonghyup Bank CEO Kwon Joon-hak, and Shinhan Bank CEO Jin Ok-dong. Heads of SME and startup-related associations such as the Korea Federation of SMEs and the Korea Venture Business Association, as well as heads of policy financial institutions including the Korea SMEs and Startups Agency and the Small Enterprise and Market Service, were also present.

They reviewed the current financial difficulties faced by SMEs and small business owners who are experiencing a complex crisis due to recent rapid interest rate hikes, high exchange rates, and high inflation, and discussed support measures for SMEs and small business owners.

According to a recent survey conducted by three SME policy financial institutions, 52.7% (288 companies) of respondents reported that their financial conditions have worsened compared to the previous year, which is about three times higher than the 17.2% who said conditions had improved. Among respondents, 384 companies (70.9%) reported an increase in loan size compared to the same period last year, and among companies that financed through loans, 326 companies (60.4%) reported that loan interest rates increased by more than 2 percentage points compared to the same period last year.

Among survey respondents, 43% said that if the currently applied loan interest rate rises by an additional 3 percentage points, it would be difficult to make normal repayments of interest or principal. Additionally, 51.8% of companies responded that the recent high interest rates have made interest repayment burdensome with current operating profits, accounting for more than half of the respondents. The most needed support measures to overcome the triple crisis were easing interest burdens (38%) and new working capital loans (31%).

Following the discussion on the survey results, the Ministry of SMEs and Startups announced its response direction to resolve financial difficulties for SMEs and small business owners.

The Ministry plans to establish measures to respond to the prolonged complex crisis facing SMEs. Since the end of June, the ‘Corporate Risk Response TF’ operated by the Ministry and related organizations has been expanded and reorganized this month into the ‘Triple Crisis Prolonged Response TF,’ including participation from external research institutions and private experts. Through this, the Ministry plans to prepare response measures for tasks identified by the Triple Crisis Prolonged Response TF.

Additionally, the Ministry plans to supply liquidity appropriately through SME policy finance. Priority will be given to providing emergency funds to companies facing dual hardships such as high interest rates, exchange rate fluctuations, and rising raw material costs, and prioritizing SME policy funds to support the growth of innovative companies such as super-gap startups. Detailed specifics will be announced in December.

The Ministry will also strengthen a preemptive response system for companies at risk of insolvency by linking financial sector-related organizations with systems, data, and policy resources. For companies judged to be at risk of insolvency but capable of normalizing management, the Ministry plans to link its crisis company support policies, including funding and consulting, with financial sector debt adjustment systems to facilitate rapid recovery.

Minister Lee Young of the Ministry of SMEs and Startups emphasized, “As rapid interest rate hikes are increasing difficulties for SMEs and small business owners, the private sector and government must cooperate to effectively respond to financial risks faced by SMEs and small business owners. I also expect banks to share their wisdom in the TF operated by the Ministry.”

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