[2022 National Audit] KEXIM's SME Export Factoring Stands at 1.28% Over 5 Years

Introduced in 2005 to support SMEs but 24 times higher support for large companies (30.5%)
Steady decline in support for large companies, sharply increased during COVID-19 period

[Asia Economy Reporter Song Hwajeong] The effect of the Export-Import Bank of Korea's representative export finance product, 'Export Factoring,' in supporting small and medium-sized enterprises (SMEs) has been minimal, while support for large corporations has significantly increased amid the COVID-19 crisis.

According to data submitted by the Export-Import Bank to Hong Seong-guk, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, over the past five years, the proportion of SME support through the Export Factoring product was only 1.28%.

Export Factoring is an export finance product where the bank purchases export receivables generated from companies' credit export transactions on a non-recourse basis. This means that even if the bank does not receive the export payment, it does not reclaim the amount from the exporting company, allowing companies to focus solely on exports without concerns about payment collection.

The total execution amount of Export Factoring over the past five years reached 11.7142 trillion KRW. However, there was a significant disparity in support proportions by company size. Large corporations received 3.5729 trillion KRW (30.5%), mid-sized companies received 7.9918 trillion KRW (68.2%), while support for SMEs was only 149.4 billion KRW, accounting for just 1.28% of the total.

Although this policy finance product was introduced to support SMEs, benefits have been concentrated on large and mid-sized companies, leading to criticism that it has lost its original purpose.

On the other hand, the proportion of support for large corporations, which had been steadily declining, actually increased during the COVID-19 period.

The scale of support for large corporations under the Export Factoring system decreased from 3.5 trillion KRW (68.16%) in 2012 to 411.4 billion KRW (18.86%) in 2019. However, it rebounded to 595.6 billion KRW (27.12%) in 2020 and surged to 1.4443 trillion KRW (49.50%) the following year. In contrast, support for SMEs that year was only 15.7 billion KRW.

Assemblyman Hong Seong-guk stated, "During the harsh period when the global market froze due to the pandemic crisis, even the policy finance system of the national bank turned its back on SMEs. Now, with raw materials, interest rates, and exchange rates rising consecutively, the trade environment for small export companies has become very difficult. Therefore, the Export-Import Bank needs to take extraordinary measures to strengthen support for SMEs."