FSS pushes expansion of loans to benefit SMEs

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FSS pushes expansion of loans to benefit SMEs

The Financial Supervisory Service plans to advise non-banking lenders to provide movable collateral loans to small and midsize companies this year to help them raise capital.

“We are currently planning to adopt a financial system in which non-banking lenders also offer movable collateral loans to companies this year,” said an official from the FSS.

Non-banking lenders include insurance companies, savings banks and credit card companies.

The move to expand the number of financial institutions offering movable collateral loans to SMEs comes as data showed yesterday that demand among SMEs for such loans has been high over the past year since commercial banks started offering them. Movable collateral loans differ from other collaterals like real estate as they refer to loans backed by agricultural crops, livestock, machinery and receivables.

On Aug. 8 last year, commercial banks started providing movable collateral loans to SMEs as part of the government’s effort to help companies raise capital. Large companies are given various options to finance their businesses such issuing bonds and stocks and loans from commercial banks at a relatively low interest rate. However, SMEs have complained that it is difficult for them to raise capital.

The FSS data showed that in the year since commercial banks started offering movable collateral loans, local banks provided a total of 627.9 billion won ($564 million) worth of loans to 2,457 companies.

Meanwhile, as part of efforts to inform SMEs about using movable collateral loans to prevent capital crunch, the FSS said there should be a change in perception.

“There are some negative perceptions on SMEs receiving movable collateral loans from banks thinking that they are in serious financial difficulty,” the FSS official said. “We plan to hold conferences to urge SMEs to receive more movable collateral loans if needed.”

BY LEE EUN-JOO [angie@joongang.co.kr]
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