Ministry of SMEs and Startups Lays Foundation to Expand Guarantee Funds for Regional Credit Guarantee Foundations

Passage of the 'Jiyeok Sin-yong Bojeung Jaedan-beop' Increasing Legal Contribution Rates for Financial Companies in the National Assembly Plenary Session

The Ministry of SMEs and Startups announced that the amendment to the 'Regional Credit Guarantee Foundation Act,' which raises the upper limit of the statutory contribution rate for financial companies to the Regional Credit Guarantee Foundations and the Korea Credit Guarantee Fund from 0.1% to 0.3%, was approved at the National Assembly plenary session on the 25th.

The statutory contribution by financial companies is a system where financial companies contribute a certain percentage (contribution rate) of their loans, specifically those characterized as corporate loans (working capital), to guarantee institutions every month.

Minister Oh Young-joo of the Ministry of SMEs and Startups is explaining the main policies of the ministry at the 2024 Policy Direction Briefing held on the 11th at the Korea Federation of SMEs in Yeouido, Yeongdeungpo-gu, Seoul. Photo by Jo Yong-jun jun21@

This revision of the statutory contribution rate range is the first in 18 years since the establishment of the mandatory contribution basis for financial companies to the Regional Credit Guarantee Foundations and the Korea Credit Guarantee Fund in 2006.

Since the implementation of the statutory contribution system, the guarantee scale of the Regional Credit Guarantee Foundations has increased annually, especially during the COVID-19 period, reaching 44.3 trillion KRW as of the end of last year. Nevertheless, the statutory contribution rate range under the 'Regional Credit Guarantee Foundation Act' has remained unchanged since its initial designation.

With this amendment raising the upper limit of the contribution rate to the same level as the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation, a foundation has been established to additionally expand the guarantee resources of the Regional Credit Guarantee Foundations, which support credit guarantees for small business owners and small enterprises lacking sufficient collateral.

However, the actual contribution rate is determined within the range stipulated by the 'Regional Credit Guarantee Foundation Act' according to its enforcement decree.

In this regard, the Ministry of SMEs and Startups has continuously consulted with the Financial Services Commission to realize the contribution rate, and during the amendment process of the 'Regional Credit Guarantee Foundation Act,' they agreed with the Financial Services Commission to raise the contribution rate.

The agreement is to raise the contribution rate from 0.04% to 0.05%, applying 0.07% for two years. Furthermore, the appropriateness of the contribution rate will be re-examined through consultations after two years.

Accordingly, the Ministry of SMEs and Startups plans to promptly proceed with the amendment of the 'Enforcement Decree of the Regional Credit Guarantee Foundation Act' to raise the statutory contribution rate.

Minister Oh Young-joo stated, “In the difficult situation of sustained high interest rates, the role of the Regional Credit Guarantee Foundations is crucial to resolving financial difficulties for small business owners and small enterprises. It is encouraging that this amendment provides a basis to sufficiently expand guarantee resources. We plan to secure additional resources through the swift revision of the enforcement decree and expand the supply of new guarantees to small business owners and small enterprises.”