The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute

(ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in
this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Contents

SMEs & Credit Guarantees in Rep. of Korea

Overview of KODIT

Performances of KODIT

Summary

app

Knowledge Sharing Program

1

SMEs & Credit Guarantees in

Republic of Korea

 Criteria : 1) No. of Employees + Capital

2) No. of Employees + Sales
No. of
employees

Capital

Manufacturing

< 300

KRW 8 Billion

Mining, construction and transportation

< 300

KRW 3 Billion

Publication, broadcast, IT etc

< 300

KRW 30 Billion

Whole sale & retail, agriculture, utility,

financial service, etc.

< 200

KRW 20 Billion

Environmental service, education, etc.

< 100

KRW 10 Billion

Real estate service

< 50

KRW 5 Billion

Industries

Sales

Unit : USD billion

No. of Enterprises

No. of Employees

GDP Contribution

3,231,634

12,626,746

679

222

LEs

3,053

1,907,484

779

246

Total

3,234,687

14,534,230

1,458

468

SMEs

Value Added

Numbers in GDP Contribution and Value added are only for the enterprises of manufacturing industry with employees of 5 or more

Major sources of employment

SMEs

Main sources of continued job creation

Sources of innovation and entrepreneurship
Condition for sustained growth of large enterprises
Basis of national competitiveness
4

 Popular policy tool throughout the world

- Over 2,250 institutions in more than 100 countries
- Aims at changing the attitude of participants

Access to
formal financing

Supply loans

SMEs

Banks

Eliminating
Credit Risk

Credit
Evaluation
Guarantee
Institution
5

61
72
74
76
89
99
00

Enforced The Credit Guarantee Reserve System

Enacted

8.3 Presidential Emergency Decree

Enacted

The Credit Guarantee Fund Act

Founded Republic of Korea Credit Guarantee Fund (KODIT)

Founded Republic of Korea Credit Technology Guarantee Fund
(KIBO)
Enacted The Regional Credit Guarantee Foundation Act
Founded Korean Fed. of Credit Guarantee Foundation

KODIT, KIBO, and 16 CGFs are 3 axes of the Korean guarantee system
Each institution operates in separated target markets.
Institutions

Target Business

Sources of Fund

Market Share
(Yr 2013)

KODIT
(1976~ )

General
SMEs

Central Government
Banks

55.0%

KIBO
(1989~ )

Tech-Oriented
Venture Companies

Central Government
Banks

25.7%

16 CGFs
(1999~ )

Small & Micro

Companies

Local Government
Banks

19.3%

Unit : KRW trillion

2011
KODIT

2012

2013

2014.6

38.4

39.3

40.6

41.3

KIBO

17

17.7

18.9

25.7

CGFs

13.6

13.5

14.3

14.7

69

70.5

73.8

75.1

SME Loans(B)

441.3

461.3

488.9

508.8

A/B

15.6%

15.3%

15.1%

14.8%

Total(A)

Overview of KODIT

10

[ As of end of the Yr 2013 ]

Legal Status

Not-for-profit organization

Establishment

June 1976

Capital Fund

KRW 6.0 trillion (USD 5.8 billion)

Outstanding
Guarantees

KRW 47.4 trillion (USD 45.6 billion)

Number of customers : 223,081

Organization

(Head Office) 4 Divisions, 13 Dept., 4 Offices

(Branch) 9 Local Headquarters, 102 Branches

Employee

2,150
11

Exchange rate $1=\1,039

Credit
Guarantee
Guarantee
for SMEs

Consulting
Credit
Insurance

Infrastructure Credit
Guarantee
Guarantee for
for-profit companies
investing in SOC

Consulting
for SMEs

Insurance for
SMEs Account Receivables
12

Contribution
Government
(irregular)

Banks (regular)

Subject to governments annual budget

Mandatory donation in proportion to monthly balance of

outstanding commercial loans (Total 0.380%)
Contribution Rate
KODIT 0.225%

Others (irregular)

KIBO 0.135%,

CGFs 0.020%

Occasional contributions from large enterprises and others

13

14

Government contributions tend to increase during the crises and decrease

during the stable economic conditions
Unit : USD million

3,500
10

3,000

2,500

1,266

2,000

Others
Banks

1,500

1,000

Gov't

426

500
486
2004

2
286

501

280

280

2005

2006

1,849

38

10

648

718

789

121

86

2007

2008

2010

2009

15

1
954

2011

18

60

797

771

2012

65.5
2013

16

Apply
&
Interview

Credit Analysis
&
On-site Visit

SMEs application

Document submitted

Eligibility check-up by
interviewer of KODIT

& reviewed
On-site visit by
analyst of KODIT

Evaluation
&
Approval

Evaluation of credit
rating
Decision-making on
guarantee approval

17

Issuance of
Guarantee
Letter

Sign the contract

Guarantee fee

 Adopts negative list system

All for-profit entities are eligible except for
Classification
Restriction by Law
Restricted Industries

Restrictions
Enterprise subrogated by KIBO or CGFs
Industries such as extravagant goods, adult entertaining,
Liquor & Cigarettes, Gambling
Enterprise not in operation, having overdue loan or tax

Risk management

Defaulted enterprise
Enterprise with poor financial status or low credit rating
18

General Ceiling

KRW 3 billion($ 2.8 million) per enterprise

Ceiling can be reduced according to the credit rating
of the firm
KRW 1.5 billion($ 1.4 million) per enterprise
whose comprehensive credit rating is below
certain grade(K12)

KRW 7 billion($ 6.5 million) per enterprise

Special Ceiling

(Only applied to special loans and companies)

- Guarantee for Knowledge based industries
- Guarantee for Export Financing
- Guarantee for Green Growth Industries , etc.

19

20

 Basis rates differentiated by the credit rating of a firm : APR 0.5~2.5%

Adjustment : added or subtracted by policy purposes
Average guarantee fee rate of 2013 : 1.24%

Basis

APR 0.5 ~ 2.5%

by
Credit Rating

Adjustment
(+)

Long-term & Large-amount User 0.1 ~ 0.4%

Large Enterprise 0.5%

(-)

Policy oriented guarantee 0.1 ~ 0.3%

(i.e. start-up, exporting, innovative SMEs)

21

Performances of KODIT

22

 Set by the approval of Financial Services Commission

Outstanding guarantee and new guarantee supply will be determined
by the yearly trend and macro economic plan of the government

Unit : KRW billion

Target

Goal
(2013)

Goal
(2014)

O/S Guarantee(Gen.)

39,000

39,500

Export

8,000

8,000

Start-Ups

10,600

11,100

Creative Sector

Newly set goal

3,000

New Growth Engine

Newly set goal

5,600

Facility Investment

Newly set goal

3,600

23

Category

General
Scheme

2010

2011

2012

2013

No. of Customers(A)

218,744

229,748

233,827

230,252

223,075

Outstanding
Guarantees(B)

36,644

36,207

35,880

36,674

37,891

168

158

153

159

170

7,156

8,125

6,588

5,759

6,401

(USD million)

CG per customer(B/A)
(USD thousand)

P-CBO
Scheme, etc

2009

Outstanding
Guarantees
(USD million)

24

Unit : KRW billion

2010
Contributions(Banks)(A)
Contributions(Gov)(B)

846
-

2011
1,063
-

Guarantee fees
Other revenue
Total Revenue(C)

467
334
801

Payment under guarantee

Reserves for guarantees

Other expense
Total expenses(D)
Net income(A+C-D)

2012

2013
856
-350

888
50

463
367
830

467
334
801

483
308
791

1,109
15
286
1,410

1,268
279
313
1,860

1,304
242
332
1,878

1,373
157
317
1,847

237

33

-221

-168

25

 As a government sponsored organization, KODIT is monitored and

assessed by related authorities

Ministry of Strategy
and Finance

Financial
Services
Commission

Small and Medium

Business
Administration

National
Assembly

Board of Audit
and Inspection

Approval of
Annual
Performance
Goals

Decision of
Governments
Contribution to
KODIT

Parliamentary
Inspection

Inspection

Budget Planning
Business Performance
Assessment
Fund Management
Assessment
Assessment
on the Maintenance or
Abolition of the Fund
CEO Performance
Assessment
26

Classification
Applicable Act

Details
Act on the management of public institutions

Criteria

Performance assessment for last 1 year

3 criteria based on PDCA* :
Leadership
Major businesses
Management efficiency

Period

Every year

Follow-up
Measures

Increase or decrease of performance-related salary

Increase or decrease of expense budget (1%)
Warning, firing CEO, and draw up performance
enhancement plans

Note : Deming Cycle (Plan, Do, Check, Act)

27

 Expansion of guarantees helped economic recoveries

Unit: KRW Trillion

Unit: US Billion

1,200.0

Global Financial Crisis

1,000.0
800.0

40.00
35.00

Bond Market Crisis

Asian Currency Crisis

600.0

30.00
25.00
20.00
15.00

400.0

10.00

200.0
-

45.00

5.00
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
GDP

Outstanding
CG
28

Since establishment of KODIT, SME loans have been increased

* Core policies : Credit guarantee, SME banks, SME loan guideline, etc.

Unit : billion USD

Category

1975
Amount

2013
%

Amount

LEs

1.1

64.3%

158.3

25.8%

SMEs

0.7

35.7%

455.3

74.2%

Total

1.8

100.0%

613.6

100.0%

29

CG helps the Stability of Financial Institutions

Risk weight for guaranteed loans : 0%

Banks can exploit the capacity spared
from the reduced capital requirement

30

Summary

31

CG is
- Powerful policy tools for governments
- Efficient way of distributing financial resources
ex) subsidy(10), direct loan(11), CG(1more than 1)

- Changes the attitudes of participants

However it can be expensive.

32

When Designing a Credit Guarantee Scheme..

Moral Hazards

- Guaranteed Companies
- Banks
- Guarantee Institutions

Funding
Market Distortion
33

app.

Knowledge Sharing Program

34

Aims at assisting in enhancing

development capacities of the partner
countries by sharing Republic of Koreas
experiences
Partner countries under KSP

Ethiopia

35

How can your country get involved

in a KSP Project?

KSP Homepage: www.ksp.go.kr

36

 Under KSP, KODIT offers policy consultation regarding

Introduction and Establishment of Credit Guarantee System

Viet Nam (2007~ ) : For the vitalization of credit guarantee system

Cambodia (2010) : Establish the credit guarantee system
Kazakhstan (2011~ ) : Establish the credit guarantee system
Ghana (2012~ ) : Establish the credit guarantee system
Mongolia (2013~ ) : For the vitalization of credit guarantee system
Indonesia (2013) : For the vitalization of PPP(public-private partnership)
37

Website : www.kodit.co.kr
E-mail: intl@kodit.co.kr

file.

38