Reducing "Life-Support Loans" and Scaling Up Commercial Districts... Structural Shift in Small Business Policy

378 Billion Won for Revitalizing Local Commercial Districts... Ninefold Increase
Loan Support Budget Cut by 408 Billion Won
"Reducing Short-Term Aid, Focusing on Laying the Foundation"

The government has set "revitalizing local commercial districts" as the core direction of its small business support policy for next year and has significantly increased the related budget. In contrast, the budget for loans, which provide financing to small businesses, has been cut. This suggests an intention to focus on fostering the self-sufficiency of small businesses centered around local commercial areas, rather than relying on short-term support measures for basic livelihood.

Vacant stores line a commercial area in Sinchon, Seoul. Photo by Jo Yongjun

According to the Ministry of SMEs and Startups on December 30, the budget for revitalizing local commercial districts among small business support projects has increased more than ninefold, from 4 billion won this year to 37.8 billion won next year. This marks the largest increase among all small business programs. Specifically, new projects such as Glocal Commercial Districts (15 billion won), Local Hub Commercial Districts (10 billion won), and Promising Alleyway Commercial Districts (12.5 billion won) have been established, driving up the total budget. These initiatives are scheduled to be officially implemented after being individually announced by the Small Enterprise and Market Service in February next year.

Revitalizing local commercial districts has been one of President Lee Jaemyung's key priorities since the presidential campaign. President Lee has included "Commercial District Renaissance 2.0" as a national agenda item and has emphasized the need to foster alleyway commercial districts that reflect local characteristics, positioning them as a new growth engine for the Korean economy. Minister Han Seongsook and Second Vice Minister Lee Byungkwon of the Ministry of SMEs and Startups have also highlighted the revitalization of local commercial districts as a main task for the small business sector through events such as the "Small Business Growth Relay Roundtable." Based on this broad consensus, there are expectations that, starting next year, policy efforts will be concentrated on strengthening the economic foundation centered on small businesses and alleyway commercial districts.

An official from the Ministry of SMEs and Startups stated, "There was a consensus in both the government and the National Assembly that revitalizing local commercial districts should be intensively supported," and added, "Although many new projects have been established or seen increased budgets, such as the new 14.3 billion won AI utilization support project for small businesses, this is the only project that has increased by such a large margin."

While this year's small business budget from the Ministry of SMEs and Startups reached a record high of 5.4 trillion won, the significant reduction in the loan support budget is also drawing attention. The policy loan budget for small businesses has been reduced by approximately 408 billion won, from 3.77 trillion won this year to 3.362 trillion won next year. Specifically, the specialized funds for small manufacturers have been cut by more than half, from 450 billion won to 200 billion won, and the co-prosperity growth support fund, which was newly established last year to support marketing for small businesses on online platforms, has been reduced by 24%, from 100 billion won to 76 billion won.

This has led to assessments that the Ministry of SMEs and Startups is shifting its policy focus from survival-oriented loan support to fostering the self-sufficiency of small businesses. This aligns with the ministry’s policy stance for next year, which emphasizes "performance-oriented, focused support." At the 2026 work report held on December 17, Minister Han announced plans to selectively allocate policy resources to companies with outstanding growth and potential starting next year. It signals a shift in policy structure toward creating an ecosystem where competitive small businesses can naturally be discovered and grow, while reducing "life-support loans" that rely on short-term liquidity supply.