SMEs Ministry Sets Record-High Fund of Funds Budget... Loan Projects Reduced (Comprehensive)

16.8 Trillion Won Budget Set for Next Year, Up 10.5%
Focus on Five Key Areas: Startups, AI, Regional Economy, and More
Emphasis on Restructuring and Reinvestment for "Real Growth"

The Ministry of SMEs and Startups has allocated a record-high budget for the Korea Fund of Funds for next year. The ministry aims to meticulously establish a ladder for growth, enabling startups to evolve into global unicorn companies (unlisted companies valued at over 1 trillion won), as part of its plan to become one of the world's top four venture powerhouses. While the budget for digital transformation of small businesses and SMEs has been significantly increased, the budget for policy funds focused on loans has been drastically reduced.

On September 2, the Ministry of SMEs and Startups announced that it has set the 2026 budget at 16.8449 trillion won. This is an increase of 1.5961 trillion won (10.5%) compared to this year’s main budget of 15.2488 trillion won. Deputy Minister Noh Yongseok said at a briefing held at the Seoul Government Complex in Jongno-gu, Seoul, "We will mobilize all policy capabilities to ensure that SMEs and small business owners can achieve real growth."

This budget focuses on five major areas: ▲Startup and venture innovation ▲Digital and AI transformation ▲Crisis response for small business owners ▲Revitalization of regional corporate ecosystems ▲Establishment of a foundation for mutual growth. The ministry has reduced total expenditures by 1.9 trillion won, including a 1.4 trillion won loan project, routine operating expenses, and some research and development (R&D) projects that have reached their sunset period, concentrating resources on supporting new growth engines.

The most significant change is the reduction of loan projects. Deputy Minister Noh explained, "Considering the recent comments at the national fiscal austerity meeting regarding loan projects, we have reduced SME loan support by about 400 billion won. However, by additionally utilizing about 360 billion won in interest subsidy funds, the overall supply volume will not change significantly." Hwang Youngho, head of the SME Management Stability Support Division, added, "Some funds had low execution rates compared to demand, so we increased the size of popular funds while adjusting less efficient projects."

A significant portion of the reduced loan budget has been redirected to support for ventures and startups. Next year's budget for startup and venture support has been set at 4.3886 trillion won, a 23.3% increase from this year's 3.5585 trillion won. Of this, 1.1 trillion won is allocated to the Korea Fund of Funds, marking the first time the fund's main budget has exceeded 1 trillion won. Kim Bongdeok, Director of Venture Policy at the ministry, stated, "The venture investment market is currently much more contracted compared to its peak in 2021-2022. Given the clear policy rationale for nurturing innovative startups and the government’s goal of fostering unicorn companies, we believe expanding the Fund of Funds budget is absolutely necessary."

Additionally, the budget for digital and AI transformation has increased by 16.3% year-on-year to 3.7464 trillion won. The budget for distributing smart factories has nearly doubled to 436.6 billion won, and a new project has been launched to rapidly commercialize AI-applied products in manufacturing sites. Export support budgets have also been expanded, including 3 billion won for the K-Beauty Cluster centered on the cosmetics industry and 150.2 billion won for export vouchers.

The budget for supporting small business owners has slightly increased to 5.5278 trillion won. This includes 579 billion won for the Small Business Management Stability Voucher, which provides up to 250,000 won to 2.3 million small business owners with annual sales of less than 104 million won, as well as 3.362 trillion won in policy funds. New initiatives include 128.1 billion won for fostering globally competitive K-small businesses and 11.4 billion won for supporting innovative small business owners in utilizing AI.

The budget for revitalizing the regional economy is set at 1.3175 trillion won, with increased funding for regional innovation zones, the Jump-Up Program, and regional flagship industry R&D. In the area of mutual growth, support for technology protection has been increased to 5.1 billion won, and for the first time, 850 million won has been allocated to support business succession M&A (mergers and acquisitions) to address succession gaps in SMEs.

Minister Han Seongsook stated, "By swiftly and thoroughly executing the first budget plan formulated under the current administration, we hope the warmth of fiscal policy will quickly permeate our economy and benefit SMEs and small business owners."

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