Odd-Even System for Small Business Financial Support... Will It Resolve Bottlenecks?

Kim Yong-beom, First Vice Minister of the Ministry of Economy and Finance, held a joint briefing with the Financial Services Commission and the Ministry of SMEs and Startups at the Government Complex Sejong on the 27th, announcing the "Rapid Execution Plan for Financial Support for Small Business Owners in Response to COVID-19."

[Asia Economy Reporter Joo Sang-don] The government has decided to implement an odd-even system based on birth years starting next month to provide faster financial support to small business owners affected by the novel coronavirus infection (COVID-19).

On the 27th, the government held a joint briefing at the Government Seoul Office with the Ministry of Economy and Finance, the Financial Services Commission, and the Ministry of SMEs and Startups, announcing the "Rapid Execution Plan for Financial Support to Small Business Owners in Response to COVID-19," which includes these measures.

First, the government will operate an odd-even system from April 1 for the "10 million won direct loan" program, which provides loans of 10 million won without guarantees to small business owners with a credit rating of 4 or lower at 62 Small Enterprise and Market Service (SEMAS) regional centers nationwide. On odd-numbered days, individuals born in odd years can apply for loans, and on even-numbered days, those born in even years can apply.

Additionally, starting from the 1st of next month, all commercial banks and the Industrial Bank of Korea will accept applications for emergency management fund loans at an annual interest rate of 1.5% for small-scale small business owners and self-employed individuals in retail, food service, lodging, and other sectors. Using this program, loans can be received within five days after application, and loans are available without guarantee fees (around 0.5~0.8%).

The screening for ultra-low interest small loans of up to 30 million won, totaling 5.8 trillion won, by the Regional Credit Guarantee Foundation (Jishinbo) will be outsourced starting April 6. This is to conduct loans and guarantees simultaneously and reduce the execution period to about five days. However, it is expected that the processing period will recover to around five days by late April after resolving accumulated volumes over two to three weeks following implementation. Also, within this month, inter-agency agreements will be revised so that the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation actively provide guarantees for ultra-low interest loans.

Since the 25th, the SEMAS fund management stabilization fund, which only handles credit ratings of 4 or lower, will be unified into the "SEMAS 10 million won direct loan" instead of proxy loans through banks. At this time, high-credit borrowers (grades 1 to 3) will be actively guided to use other products through SEMAS.

Along with this, SEMAS, the Industrial Bank of Korea, and commercial banks will collect documents such as "certificates to prevent duplicate support" to avoid overlapping receipt of funds, and will provide prior notice that those who receive duplicate support through fraudulent means may face disadvantages.