[Asia Economy Reporter Kim Daeseop] The Korea Federation of Small and Medium Business (Kbiz) announced on the 25th that it has signed a 'Dedicated Guarantee Agreement for Joint Purchasing of Small and Medium Enterprises' with four institutions including the Korea Credit Guarantee Fund.
This agreement was prepared to address the representative on-site difficulties of joint purchasing of raw and subsidiary materials by SMEs, such as lack of purchasing power and payment stability.
On the same day, Kbiz held a signing ceremony at its headquarters in Yeouido, Seoul, with the Korea Credit Guarantee Fund, Korea Technology Finance Corporation, IBK Industrial Bank of Korea, and the Korea Credit Guarantee Foundation to expand the dedicated guarantee project for joint purchasing by SMEs.
Under this agreement, the credit guarantee institutions (Korea Credit Guarantee Fund, Korea Technology Finance Corporation, Korea Credit Guarantee Foundation) will issue guarantees to companies participating in joint purchasing, and IBK Industrial Bank of Korea will be responsible for providing purchase funds. Kbiz and cooperatives plan to reduce the cost of purchasing raw and subsidiary materials by promoting joint purchasing through integrated purchase volumes and cash payments.
Kbiz and IBK Industrial Bank of Korea will each contribute 3.4 billion KRW, totaling 6.8 billion KRW, as guarantee funds to the credit guarantee institutions. A total of 132 billion KRW in guarantees will be issued (valid for 5 years), including 80 billion KRW from the Korea Credit Guarantee Fund, 40 billion KRW from the Korea Technology Finance Corporation, and 12 billion KRW from the Korea Credit Guarantee Foundation.
In particular, preferential benefits such as a 0.5 percentage point reduction in guarantee fees and up to a 2.0 percentage point reduction in loan interest rates will be provided. Seven regional credit guarantee foundations nationwide will newly participate in July this year, expanding the target to include small business owners.
According to Kbiz, through the dedicated guarantee project for joint purchasing, 538 SMEs have received guarantees worth 161.8 billion KRW from 2018 to April this year.
Additionally, through 6,124 transactions, joint purchases worth 221.3 billion KRW were promoted. In 2019, the second year after the system was introduced, the issuance of guarantees increased 3.5 times and the amount of joint purchases increased 10.2 times. Joint purchases conducted from January to April this year averaged 20 billion KRW per month, a 5.4-fold increase compared to the average of 3.7 billion KRW during the same period last year.
Kim Gi-moon, chairman of Kbiz, said, "The dedicated guarantee project for joint purchasing has greatly contributed to cost reduction and price competitiveness of SMEs, leading to a significant expansion in recent utilization." He added, "As the difficulties of SMEs are increasing due to COVID-19, it is necessary to continuously expand the dedicated guarantee system to alleviate cost burdens."
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