Since the end of 2011, the Financial Services Commission (FSC) has been monitoring the performances of small and medium enterprises (SME), and supply and demand of funds available for them. The purpose of monitoring was to avoid economic shock which is likely aftermath of European financial crisis.
On the basis of the monitoring, in February this year, the FSC designed a policy implementation seeking to expand financial capability of young entrepreneurs and start-up businesses. It is because the FSC now recognizes the significant role of young entrepreneurs whose participation is expected to invigorate the economy as a whole, which ultimately leads to sustainable economic development. However, young generation has been hesitant to start up their own businesses as having been constrained by a lack of financial capabilities along with enormous fear of possible bankruptcies.
Taking these limitations into account, the FSC proposes policies to innovate financial environment which will offer favorable condition for young entrepreneurs planning to start their own businesses. To meet this ends, the National Bank Association will establish a non-profit organization called ‘Loans for Supporting Young Entrepreneurs’, and 0.5 trillion Korean Won will be injected.
A greater extent of flexibility will be introduced so as to grant more loans to young entrepreneurs. Maximum amount of loan available for an individual will be adjusted from 30 million Korean Won to 50 million Korean Won, for the purpose of easing financial constraints faced by young entrepreneurs. In addition, the loan will be granted regardless of profitability of the business since the purpose of this new scheme is to support for start-up business at their initial phases. With this increased flexibility, young entrepreneurs would find it easier to finance setting-up costs for new businesses.
The benefits of such innovation will not be limited to young entrepreneurs, but rather be shared multilaterally by various economic participants. Individuals other than entrepreneurs themselves will take advantage over increased employment opportunities derived from improvement in business performances. This implies that expanding financial capability of young entrepreneurs and start-up businesses will generate positive spill-over effects, which is to contribute to expand the economic capacity in Korea.
Su Jee An (firstname.lastname@example.org)