The Korean government has been carrying out financial supporting programs (FSP) for small‐and medium‐sized enterprises (SMEs) to strengthen the competitiveness and growth potential of SMEs. The budget related to SMEs in 2013 will be 10 trillion and 567 billion won, and 46% of the budget, which is 4 trillion and 905 billion won, will be disbursed to the FSP for SMEs. The government not only provides policy funds to SMEs but also supports SMEs’ financing with various government sponsored institutions for credit guarantee. Nevertheless, it has been suggested that the government does not provide efficient financial support to proper SMEs. This report evaluates the FSP for SMEs and suggests several policy recommendations.
As a result of evaluation, this report finds several problems with the FSP for SMEs. Although the government supports SMEs’ financing through various government sponsored institutions, the lack of complementary roles among institutions leads to a lack of effectiveness in fund provision. In addition, the direct funding scheme provided by the Small and Medium Business Corporation (SMBC) needs to strengthen the support to economically disadvantaged SMEs rather than offering generalized support without considering individual SMEs’ financial status. Furthermore, the FSP of funds for equipment is insufficient. Finally, redundant financial support to one SME is generalized since the SMBC provides direct funding, and various government sponsored institutions offer credit guarantees.
This report suggests policy recommendations as follows. Above all, it is necessary that the government make the various government sponsored financial institutions work in a complementary fashion. Moreover, the FSP needs to be reorganized by putting priorities of support to economically disadvantaged SMEs first. Lastly, the government needs to activate investment for equipment for SMEs.
Yoon Sungsik
As a result of evaluation, this report finds several problems with the FSP for SMEs. Although the government supports SMEs’ financing through various government sponsored institutions, the lack of complementary roles among institutions leads to a lack of effectiveness in fund provision. In addition, the direct funding scheme provided by the Small and Medium Business Corporation (SMBC) needs to strengthen the support to economically disadvantaged SMEs rather than offering generalized support without considering individual SMEs’ financial status. Furthermore, the FSP of funds for equipment is insufficient. Finally, redundant financial support to one SME is generalized since the SMBC provides direct funding, and various government sponsored institutions offer credit guarantees.
This report suggests policy recommendations as follows. Above all, it is necessary that the government make the various government sponsored financial institutions work in a complementary fashion. Moreover, the FSP needs to be reorganized by putting priorities of support to economically disadvantaged SMEs first. Lastly, the government needs to activate investment for equipment for SMEs.
Yoon Sungsik