Moon announces $38.9 billion in financial support for SMEs

President Moon Jae-in announces 50 trillion won in an emergency financial aid for small businesses at the Blue House on Wednesday. [YONHAP]

President Moon Jae-in held his first emergency economic council meeting at the Blue House on Thursday and said 50 trillion won ($38.9 billion) in emergency financial aid will be offered to small businesses.

Moon called the aid comprehensive and unprecedented in size, meant to prevent bankruptcies of small and medium sized businesses (SMEs).

The president said 12 trillion won in loans with interest rates of 1.5 percent will be offered to small business owners. The loans will be made through state-own financial institutions and commercial banks.

Additionally 5.5 trillion won in loan guarantees will be offered to SMEs.

Businesses with revenues of less than 100 million won can get government guarantees on loans of up to 50 million won.

The president noted that for the first time banks and nonbanking financial institutions such as savings banks, insurance and credit card companies will extend loan maturities and ease loan payment schedules for small businesses.

“The most important thing is speed,” Moon said, asking financial institutions to simplify loan approvals.

“No matter what measures are introduced, they will only be meaningful if they succeed in practice,” Moon said.

“The government has to make swift decision and act boldly … The council has to be about making decisions and acting, rather than discussing and reviewing.”

He stressed that this was just a first step to help the self-employed and SMEs.

“We have to also think of supportive measures for people who either lost incomes or jobs due to the Covid-19 outbreak,” Moon said.

He told local governments to step up as well, saying there is a limit to the central government’s resources.

“This is not a usual situation and as such we have to move beyond previous methods,” Moon said. “Our goal is to prevent a collapse.”

Meanwhile the Finance Minister raised the possibility of additional market stabilization measures including a bond market stabilization fund to help companies with liquidity problems.

“[The government] will exert all efforts so that companies will not face difficulties in securing funding by swiftly activating contingency plans,” Vice Finance Minister Kim Yong-beom said during a separate meeting.

“The competition to secure dollar liquidity seems to be getting worse with the dollar appreciating in the global financial markets and spreads in the bond market widening,” Kim said.

“The government is closely monitoring the market situation and preparing for possible global capital problems and worsening corporate performances as the Covid-19 crisis expands and prolongs.”

Meanwhile the Korean stock market lost more than 120 points or 8 percent as of noon, trading below 1,500.

The last time the Kospi was below 1,500 was in 2009.

The won depreciated sharply, edging close to 1,300 won against the dollar.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]