Legal Contribution Rate for Financial Companies Set at 0.07% for 2 Years
Financial Services Commission Agreed to Rate Increase Last January
An additional KRW 1 trillion worth of new guarantees will be supplied to 32,000 small business owners in the second half of the year.
Minister Oh Young-joo of the Ministry of SMEs and Startups is speaking at the Economic Ministers' Meeting held at the Government Sejong Complex on the morning of the 3rd. [Photo by Yonhap News]
The Ministry of SMEs and Startups announced that the amendment to the Enforcement Decree of the Regional Credit Guarantee Foundation Act, which raises the statutory contribution rate of financial companies from the existing 0.04% to a maximum of 0.07%, was approved at the Cabinet meeting on the 11th.
The amendment mainly raises the statutory contribution rate of financial companies to the Regional Credit Guarantee Foundation and the Korea Credit Guarantee Fund from 0.04% to 0.05%, an increase of 0.01 percentage points. In particular, for two years from the enforcement date of the decree, the rate will be temporarily increased by 0.03 percentage points to 0.07%.
The amendment is scheduled to take effect from the 18th. The Ministry of SMEs and Startups plans to additionally supply new guarantees worth KRW 1 trillion to 32,000 small business owners in the second half of the year by utilizing the guarantee funds secured from this month.
The statutory contribution by financial companies is a system where financial companies that generate profits through guaranteed loans contribute a portion of their profits monthly to guarantee institutions. It is operated by institutions such as the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation. The Regional Credit Guarantee Foundation and the Korea Credit Guarantee Fund have been implementing this since August 2006. At the time of the system’s implementation, the contribution rate was 0.02%, but as the Regional Credit Guarantee Foundation expanded guarantee supply and the scale of guaranteed loans increased significantly, the rate was raised once to 0.04% in October 2020. However, there have been continuous criticisms that the contribution rate is still low compared to the scale of guaranteed loans by the Regional Credit Guarantee Foundation, leading the Ministry of SMEs and Startups to consult with the Financial Services Commission to adjust the contribution rate to a more realistic level. As a result, an agreement to raise the contribution rate was reached with the Financial Services Commission in January.
Oh Young-joo, Minister of SMEs and Startups, said, "I hope that the additional supply of new guarantees through the Regional Credit Guarantee Foundation will be of great help to small business owners facing management difficulties," and added, "We will continue to do our best to provide stable guarantee support to small business owners."
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