Cracking Down on Policy Fund Bait Sales... Mixed Hopes and Concerns Over Consulting System Introduction

Amendment to the SME Promotion Act Planned for First Half of This Year
Introduction of Policy Fund Consulting System
Potential for Specified Registration Requirements and Disqualification Criteria
Concerns Over Blind Spots Due to Insufficient Supply

The government will introduce a policy fund consulting system in the first half of this year to prevent third-party unfair intervention, such as demanding high fees under the pretext of assisting with policy fund applications or engaging in "bundled insurance sales." By directly managing consultants, the government aims to curb excessively high fees and illegal activities. However, there are concerns that excessive regulation of the consulting market could reduce access to information for small business owners.

The Asia Business Daily DB

According to the Ministry of SMEs and Startups on January 20, organizations such as the Korea SMEs and Startups Agency, the Agency for Traditional Market Administration, the Korea Technology Finance Corporation, and the Korea Federation of Credit Guarantee Foundations are in the final stages of preparing detailed measures for the introduction of this system. An official from the Ministry stated, "We are currently discussing specific implementation plans, referencing other legal registration systems."

The Ministry is pursuing this measure to address the side effects caused by the proliferation of private consultants who exploit the complexity of hundreds of policy fund loan types and application procedures. Long-standing issues in the policy fund "market" include consultants applying for policy funds on behalf of small businesses with poor management conditions, charging exorbitant fees in return, or forcing the purchase of insurance products.

In December last year, the Ministry launched the "Task Force on Third-Party Unfair Intervention," led by First Vice Minister Noh Yongseok, and announced related measures. As part of this initiative, it is expected that, similar to other registration systems for brokerages, the government will establish registration requirements and disqualification criteria for consultants, set fee caps, or require disclosure of fee calculation methods.

Industry representatives stated, "Policy fund consulting is a necessary market for small and medium-sized enterprises and small business owners," adding, "It would be practical to manage the market through a registration system while institutionalizing the prohibition of unfair practices such as bundling insurance or investment products and document falsification."

However, there are concerns that if excessive regulation raises the entry barrier to the policy fund consulting market, the service itself could shrink, leading to higher consulting costs or the creation of blind spots where small business owners and micro-enterprises with limited access to information are excluded from the policy fund application process.

In particular, since micro-enterprises unfamiliar with policy fund systems and financial procedures are highly dependent on private consulting, a rapid contraction of the market could make it difficult for them to utilize the system at all. Accordingly, there are calls for the government to thoroughly examine the size, demand, and supply structure of the consulting market before enacting legislation, and to appropriately balance the intensity of regulation and management methods.

Na Sumi, a research fellow at the Korea Small Business Institute, said, "Rather than unconditionally viewing policy fund consulting as a target for regulation, the government should first objectively assess regional demand differences and average consulting costs using data." She added, "In particular, in non-metropolitan regions where there are fewer private consultants compared to the metropolitan area, supplementary measures should be implemented to encourage registration in connection with policy finance institutions and local governments."

Na also stated, "For small business owners and micro-enterprises, public institutions should expand free or low-cost consulting programs to minimize any gaps."