[Exclusive] Opening the Way for Financial Capital Investment in Nonprofit Companies Caring for the Elderly

Ministry of Health and Welfare to Allow Investments in Nonprofit Corporations Handling Social Services

The Yoon Suk-yeol administration has decided to open the door for financial capital to be injected into non-profit corporations responsible for elderly care. Under current law, non-profit corporations cannot raise funds through investments, but the plan is to enable this specifically for corporations providing social services. Additionally, the government plans to establish a policy fund worth 14 billion KRW for the first time in the social service sector to discover and provide focused support to competitive corporations.

According to the Ministry of Health and Welfare on the 28th, the government is preparing financial support measures for the social service sector to help non-profit corporations secure market funds. Under relevant laws such as the Civil Act and the Act on Public Interest Corporations, non-profit corporations can currently receive financial support only through donations, contributions, or loans. Raising funds through investments is not possible. A ministry official explained, “Currently, investments are only possible in corporations structured as stock companies that can issue shares, so most non-profit corporations face difficulties in raising funds. However, since most social services related to elderly care are provided by small-scale non-profit corporations, there is a need for measures that allow the private sector to actively support them.”

Since many small-scale non-profit corporations struggle to raise funds through loans due to difficulties in proving profitability, the government aims to promote financial support policies for these entities to advance service sophistication. This is also part of the Yoon administration’s national agenda item, “Advancing welfare care services through the establishment of a social service innovation foundation.” The administration is pushing for the enactment of the “Act on Support and Promotion of Social Services” to prepare support measures for scaling up corporations providing social services.

The Ministry of Health and Welfare is also preparing a plan to attract financial capital through the establishment of a policy fund. A 14 billion KRW “Social Service Innovation Fund” will be created, with 10 billion KRW from the ministry and 4 billion KRW from private investments combined to discover and invest in promising social service enterprises. This is the first time a policy fund (a fund invested by the government with equity to promote capital supply in sectors with high market failure risk) will be established in the social service sector to open financial channels for “smart” non-profit enterprises responsible for social services and support their growth. Private investments will be open not only to companies but also to individual investors.

Since South Korea’s care services currently rely heavily on small-scale non-profit corporations, opening the way for financial capital injection is expected to improve the quality of care services. It can also promote the scaling up of small corporations. An expert in the social service sector evaluated, “Currently, most non-profit organizations providing social services are small-scale and unable to carry out impactful activities in society, but once the path for financial capital injection is fully opened, high-quality economies of scale are expected to become possible.”

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