Korea's regional credit guarantee foundations have launched a chairman council and called on the government and the National Assembly to expand the reguarantee budget and bring financial firms' statutory contribution rates to realistic levels, aiming to strengthen the financial safety net for small business owners.
The regional credit guarantee foundations recently held the "Inaugural General Meeting of the Regional Credit Guarantee Foundation Chairman Council" and released a joint appeal Tuesday, demanding that the reguarantee budget be reflected in a supplementary budget, secured in the 2027 main budget, and that financial firms' statutory contribution rates be raised.
The Regional Credit Guarantee Foundation Chairman Council was formed to complement the decision-making structure centered on the Korea Federation of Credit Guarantee Foundations and to respond jointly to key issues such as reguarantee restrictions. Participants pledged to build a cooperation system among foundations nationwide based on the principle of "one position, one voice, one action."
They explained that the business environment for small business owners and the self-employed has been deteriorating due to recent high inflation, sluggish domestic demand, rising raw material prices, and increasing financial costs. They noted in particular that the importance of policy financing support is growing further as debt accumulated since the COVID-19 pandemic and weakened consumption lead to a rise in business closures.
They argued that while the regional credit guarantee foundations serve as effectively the last channel of financial access for small business owners who lack collateral and credit, they are struggling to provide stable guarantees because reguarantee limits are insufficient amid rising defaults and expanded subrogation payments caused by the prolonged economic downturn.
To address these problems, the Regional Credit Guarantee Foundation Chairman Council first called for a prompt expansion of the reguarantee budget. Of the 413 billion won reguarantee budget requested last year by the Korea Federation of Credit Guarantee Foundations, only 157 billion won was actually reflected. The foundations argued that without securing additional funds, there are concerns over reduced guarantee supply and disrupted support.
Realistic statutory contribution rates for financial firms were also presented as a key demand. Currently, a temporary contribution rate of 0.07% is applied to the regional credit guarantee foundations and the Korea Federation of Credit Guarantee Foundations, a lower level compared with the Korea Credit Guarantee Fund (0.225%) and the Korea Technology Finance Corporation (0.135%).
In fact, as of the end of April this year, the guarantee balances of policy guarantee institutions were found to be 62.5238 trillion won for the Korea Credit Guarantee Fund, 45.2125 trillion won for the regional credit guarantee foundations, and 30.4673 trillion won for the Korea Technology Finance Corporation. The regional credit guarantee foundations take the position that, despite handling the second-largest guarantee scale, their contribution base is relatively weak.
Along with the demands for government support, the Regional Credit Guarantee Foundation Chairman Council also decided to pursue self-help efforts to strengthen fiscal soundness, including expanding the partial guarantee ratio and restructuring the guarantee system to focus on installment repayment.
Si Seok-jung, chairman of the Gyeonggi Credit Guarantee Foundation who took on the role of the first chairman of the Regional Credit Guarantee Foundation Chairman Council, said, "The financial safety net for small business owners must be maintained more firmly the greater the crisis," adding, "The regional credit guarantee foundations nationwide will join forces as one team to ensure that the support system for small business owners does not waver."
