SME Sector "Concerns Over Interest Rate Hike Decision... Liquidity Crisis Could Cause SMEs to Collapse"

Bank of Korea Raises Base Rate from 0.5% to 0.75% on 26th
SME Central Association: "4th Wave Worsens Difficulties... Financial Burden Significantly Increases"
"Following SMEs, Banks May Also Face Insolvency... Need to Check Funding Status"

Governor Lee Ju-yeol Striking the Gavel
(Seoul=Yonhap News) Lee Ju-yeol, Governor of the Bank of Korea, is striking the gavel at the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 26th. 2021.8.26
[Provided by Bank of Korea. Resale and DB prohibited]
photo@yna.co.kr
(End)

＜Copyright(c) Yonhap News Agency, Unauthorized reproduction and redistribution prohibited＞

[Asia Economy Reporter Junhyung Lee] On the 26th, the Bank of Korea held a Monetary Policy Committee meeting and raised the base interest rate by 0.25 percentage points to 0.75%, prompting concerns from the small and medium-sized enterprises (SMEs) sector.

The Korea Federation of SMEs expressed its concerns in a statement on the same day, saying, "We express our concern over the Monetary Policy Committee's decision to raise the base interest rate by 0.25 percentage points," and added, "Due to strengthened social distancing measures amid the fourth wave of COVID-19, sales have declined sharply, exacerbating difficulties for SMEs and small business owners." It continued, "With this base rate hike, the financial burden on SMEs whose sales have not yet recovered is expected to increase significantly," and warned, "This could trigger a vicious cycle where SMEs collapse due to liquidity crises and banks also suffer from simultaneous insolvency."

The statement also emphasized the need to monitor the financial situation of SMEs. The Federation said, "The government and financial sector must closely examine the loan interest rates and funding supply conditions for SMEs and small business owners to mitigate the shock of the rate hike and prevent any temporary liquidity shortages from causing collapses."