Falling Interest Rate Hits Grants

A plunge in interest rates has undermined the operations of public and private grant-making and scholarship institutions. With less interest earned on endowments, local governments and private foundations may be forced to fundamentally reassess their funding.

A teenage head of a household, who is taking care of a father stricken with paralysis and two younger siblings, has been able to continue studying because of a 500,000 won ($400) scholarship for low-income students he received from Jeongeup city. Now his grant will be cut to 300,000 won. The city has had to reduce the size of its scholarships, run with the interest earned from its 320 million won fund.

Provincial governments face the same problems. North Cholla province has set this year's grant budget at 730 million won, the same as last year, to help the activities of 266 culture and art groups. But most of the money has come from interest earned from the Korean Culture and Arts Foundation's funds, and when interest rates dropped, a 110 million won discrepancy opened up in the budget. The province therefore plans to either stop setting money aside from the interest for the fund or reduce the number of agencies it supports.

Funds given out by local governments to support small- and medium-sized companies will also be trimmed.

Research institutes are being forced to consider downsizing because of a drop in interest income. The Chungnam Development Institute in South Chungchong province had underwritten 30 percent of its budget with income earned from interest, amounting to 1.1 billion won annually. But the interest revenue plummeted to 600 million won this year, compelling it to slash salaries and downsize.

Scholarship funds run by civic groups are also feeling the pinch. The Samyang Corporation's foundation plans a 20 percent cut in funding activities next year.

by Wang Hee-soo