FSC chairman vows new funding system for small businesses

As part of efforts to provide more opportunities to small- and mid-size businesses and start-ups, the country’s financial regulator said yesterday it will rebuild the overall funding system to make it easier for the relatively vulnerable group to receive capital. Such a plan was included in a package of policy measures that President Park Geun-hye was briefed on yesterday by Shin Je-yoon, chairman of the Financial Services Commission.

According to the FSC, to create a friendlier funding environment for venture companies, it will adopt the so-called “crowd funding” system in which random individuals through an online platform are able to freely invest in start-ups.

The idea is already being used in the United States, Italy and elsewhere. In the United States, for example, President Barack Obama signed the Jobs Act last year, allowing small companies to raise funds from the public. Expanding the number of investors targeted could provide a breakthrough for start-up companies struggling to attract funding.

Details of the crowd-funding system will be drawn up by the regulator by June. The FSC will then push for a revision in the Capital Market Act.

In addition, the FSC also decided to create a 100 billion won ($89.3 million) funding program for small- and mid-size companies, allowing small businesses to sell their intellectual property to lenders and in return for funding support. The funding program led by the Korea Development Bank will be based on the so-called “sale and license back” system.

Also, to allow more small firms to grow through merger and acquisitions, the FSC said the state-run Korea Credit Guarantee Fund will back loans taken out by firms from local banks based on their current and future growth value. The regulator also said it will revamp the overall financial system to help normalize the underground economy and effectively deal with the financial crisis. In regards to the recent cyberattack that temporarily paralyzed the computer networks of four banks, the FSC said it will review the security environment of all financial institutions next month.

“We have discussed specific measures to carry out finance-related pledges of the Park Geun-hye government,” Chung Chan-woo, vice chairman of the FSC, told reporters.

The measures are in line with the Park administration, which has pledged to expand support for low- and middle-income households. Last week, the FSC launched the people’s happiness fund, which was one of Park’s campaign promises to address growing household debt. The fund aims to lessen the burden of debt on the relatively poor by having the government write off the debt of those behind on their payments.

At the policy briefing of the FSC yesterday, Park told government officials in charge of Korea’s financial market that “one of the key matters of the new administration is to revive the economy” by promoting the creative economy and economic democratization.

“If the sluggish economy continues, the pain ordinary people will have to suffer is too big,” Park said. “I urge all of you to focus economic policy on boosting the economy for ordinary people.”

By Lee Eun-joo [angie@joongang.co.kr]