Small Business Sales Channel Support Project 'TMEF'
Credit Rating B, No Disqualifying Factors
Need for Supplementary Measures to Assess Financial Soundness in Government Support Projects
The government's support for small business owners to enter e-commerce subsidiaries of Qoo10, such as Tmon and Wemakeprice (T-mep), has been analyzed as stemming from structural issues. T-mep's credit rating was 'B', indicating no issues on paper. Since the current system cannot filter this out, it has been pointed out that supplementary measures are needed to thoroughly assess financial soundness when conducting government support projects to prevent recurrence.
According to the industry on the 20th, the Small and Medium Business Distribution Center, the Ministry of Agriculture, Food and Rural Affairs, and the Ministry of Oceans and Fisheries have directly or indirectly supported T-mep to secure sales channels for small business owners. The Small and Medium Business Distribution Center ran the 'Online Sales Channel Support Project', while the Ministry of Agriculture and the Ministry of Oceans supported discounts on agricultural and marine products sold on T-mep. When a large-scale unsettled payment incident occurred at T-mep, the government project was criticized for exacerbating the problem.
On the afternoon of the 18th, sellers and consumers affected by Tmon and Wemakeprice (Timap) held a "Black Umbrella Rally" in front of the Financial Services Commission in Jongno-gu, Seoul, urging the enactment of a special law to support the victims. [Image source=Yonhap News]
The largest support Qoo10's e-commerce subsidiaries received from the government was from the Small and Medium Business Distribution Center's 'Online Sales Channel Support Project', with support exceeding 22.9 billion KRW as of 2022. However, examining this project reveals a structure that makes it difficult to filter out T-mep as a 'distressed company' in advance. This project supports the sales and promotion of small business products and collaborates with about 40 e-commerce companies domestically. According to the collaboration procedure, the Small and Medium Business Distribution Center checks the company's credit rating from credit rating agencies to verify e-commerce companies. At the time of application for project support, T-mep had a 'B' rating. This means 'the creditworthiness for transactions is average, and there is a high possibility of decreased transaction stability under worsening economic conditions and environments.' Although credit rating standards vary by agency, they are generally divided into 10 grades from 'AAA' to 'D'. The B rating is a mid-level grade and does not constitute a disqualification.
Even if real-time credit changes were checked instead of credit evaluations conducted at specific times throughout the year, it seems T-mep would have been difficult to filter out. According to Tmon's 'Credit Check Report' confirmed through NICE Information Service, as of March 2 this year, the 'Watch' rating was 'Caution'. This rating monitors companies continuously to observe changes in creditworthiness. 'Caution' is the fourth of nine levels ranging from 'Normal' to 'Default'. It indicates a company where signs of distress have been detected and a decrease in transaction stability is expected, similar to a corporate credit rating of B. Tmon's 'Caution' rating changed to 'Risk' only after the large-scale settlement incident on July 31.
Additionally, it was pointed out as a problem that T-mep did not submit a performance bond insurance when participating in the sales channel support project, but legally this is not an issue. According to Article 50 of the Enforcement Decree of the State Contract Act, contract deposits must be paid in cash or by guarantee. T-mep expressed its intention to participate in the project with a cash performance bond instead of bond insurance, and since the deposit was paid without issue, it was difficult to block participation. An industry insider said, "If you look only at the documents of companies participating in the government's e-commerce support projects, many may be at a similar level to T-mep," adding, "It is now necessary to have institutional supplementary measures that can thoroughly examine financial soundness when conducting government support projects."
Meanwhile, the Ministry of SMEs and Startups is conducting a full survey of liquidity situations targeting online shopping malls and small business owners participating in the support project after the incident caused a situation where payment to small business owners could not be made normally. Furthermore, through the status investigation, they plan to comprehensively review the settlement cycles of platform companies and select platform companies that are safe and helpful to small business owners.
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