Small and Medium Business Ombudsman, 387 Unfounded Regulations Set by Local Governments Improved

Jubong Park, Small and Medium Business Ombudsman. / Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kim Bo-kyung] The Small and Medium Business Ombudsman is improving local government regulations to reduce the financial burden on small and medium-sized enterprises (SMEs) and small business owners, and to support startups.

On the 18th, Park Ju-bong, the Small and Medium Business Ombudsman, announced that a total of 387 regulations would be improved by revising local government ordinances targeting SMEs and small business owners. These included regulations such as higher interest rate rules compared to other policy funds without special reasons and rules that excluded certain special industries from support targets.

First, 355 local government ordinances related to loan projects operated with funds from food promotion funds and SME development funds established by local governments will be improved.

In the case of the food promotion fund loan project, 240 cases will be improved through consultation with local governments on 10 improvement tasks such as standardizing loan interest rates and expanding loan targets. While interest rates for other policy funds range from 2.0% to 3.2%, some local governments had set the food promotion fund interest rate up to 7% without special reasons. Seventeen local governments have agreed to revise the food promotion fund ordinances and enforcement rules within this year to address these unreasonable regulations.

Additionally, local governments that excluded general restaurants such as Hof houses, which are not entertainment establishments, from loan targets will also improve this.

Regarding the SME development fund loan project, some local governments have applied excessive loan conditions, such as restricting not only the target business locations but also the business owners’ residences to be within the jurisdiction, and this will be improved.

For loans of 200 million to 500 million KRW or more, the loan period will be extended from less than 5 years to at least 5 years to ease repayment burdens, and the loan application deadline will be extended from 1 month to 2 months or more to facilitate the loan process.

Thirty-two ordinances related to startup support institutions operated by 27 local governments, such as startup incubation centers and startup support centers, will be improved. The SME Startup Support Act sets the residency target for startup support institutions as within 7 years after startup. However, some local governments have limited the residency target to within 3 years due to space constraints, thereby reducing the scope of residents. The residency target will be expanded from within 3 years to within 7 years after startup, and the residency period will be extended from 2 years to 3 years.

The Ombudsman negotiated revisions to local government ordinances with 208 local governments nationwide over about three months starting from October last year. The relevant improvement tasks are expected to be sequentially completed according to the local governments’ schedules.

Park Ju-bong, the Ombudsman, said, "It is expected that local government ordinances, which were disadvantageous to SMEs and small business owners struggling due to interest rate hikes and economic crises, will be improved through this opportunity," and added, "We will continue to pursue regulatory improvements that the public can feel."