Shinhan Financial commits 200 billion won to fund

Shinhan Financial Group, the country’s largest financial holding company, committed 200 billion won ($1.72 billion) to support small- and medium-sized companies (SMEs) by 2022.

The funds will be mainly invested in a 1 trillion won venture fund formed by Korea Venture Investment, which is a fund-of-funds.

In a “fund-of-funds,” an umbrella fund invests in other investment entities.

The move is a part of an agreement with the Ministry of SMEs and Startups and the Korea Venture Business Association, a business lobby group for smaller tech-focused firms.

Shinhan also became the first financial company in the country to participate in the government-backed scale-up fund, which will be 12 trillion won in size.

While the group declined to disclose its specific contribution in the scale-up fund, the fund is aimed at creating 20 unicorn companies - start-ups worth more than $1 billion - by 2022. Korea currently has six unicorn companies.

In line with the effort, the financial group will introduce a loan program with interest rates lowered depending on the stage of a smart factory’s development.

The higher the technological standard, the lower the interest rate.

In addition to the financial support, the group will also offer consulting services that cover legal, tax and compliance issues.

Shinhan vowed to develop financial products tailored for high potential tech companies when it launched a committee to expand financing for promising small- and medium-sized companies in March.

Chairman Cho Yong-byoung is at the helm.

The CEOs of Shinhan’s 14 financial affiliates - including Shinhan Bank, Shinhan Card and Shinhan Investment - will be tapped as members of a Steering Committee at the top of the body.

The group said that the main task of the new team is to revamp the loan screening processes at the group’s affiliates, including Shinhan Bank and Jeju Bank, to facilitate lending to young, tech-focused companies.

Shinhan is not alone in joining the government’s push to bolster small and medium-sized companies.

Woori Financial Group, the third largest player in the sector, said last week it will provide 33 trillion won worth of favorable loans and investment over the next five years to innovative startups and small and medium-sized companies.

To manage the fund, the group announced that it will set up a venture capital firm.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]