Kim Joo-hyun (R), chairman of the Financial Services Commission, speaks during a meeting in Seoul in this file photo taken Feb. 6, 2024. (Image courtesy of Yonhap)
SEOUL, Feb. 15 (Korea Bizwire) — The Seoul government and five major banks here plan to provide nearly 76 trillion won (US$56.9 billion) this year to help local businesses invest in new advanced technologies and lower their financial burdens, the financial regulator said Thursday.
The move comes amid high interest rates that have placed additional burdens on local firms while their sales and exports have been on the decline, the Financial Services Commission (FSC) said.
The financial regulator explained the average rate on corporate loans extended by banks came to 5.29 percent last year, compared with 2.84 percent in 2020 and 3.14 percent the following year.
“The (economic) crisis is expected to enter a recovery phase with prices gradually becoming stabilized and the economy recovering on strong exports,” the FSC said.
“However, overall economic conditions continue to remain gloomy as interest rates continue to remain high while the economic recovery is mostly centered around export-oriented sectors, such as information technology and semiconductors,” it added.
The financial support for local businesses will be tailored to meet their specific needs, mostly on the size of each company.
For instance, large conglomerates are mostly focused on advanced high-tech industries, such as semiconductors, which are expected to require a total investment of 607.7 trillion won by 2030.
However, about 70 percent of large businesses here have currently secured less than 60 percent of the funds they need for their new investments, according to the FSC.
To this end, the government, along with the local lenders, will provide up to 20 trillion won in support funds to large businesses investing in advanced technologies.
For medium-sized firms, the government and the banks will provide up to 15 trillion won, partly to help lower their interest rates. (Image courtesy of Yonhap)
For medium-sized firms, the government and the banks will provide up to 15 trillion won, partly to help lower their interest rates.
The FSC noted that medium-sized businesses generally pay higher interest rates than larger or smaller firms.
In 2022, the average interest rate on bank loans extended to medium-sized firms was tallied at 4.56 percent, compared with 3.25 percent for conglomerates and 3.52 percent for small enterprises, it said.
The largest share of 40.6 trillion won will be used to support small businesses, including 16.3 trillion won in policy loans alone to support their new investment.
“The importance of small firms in the number of businesses and jobs is absolute,” the FSC said, noting small companies make up 97.8 percent of all businesses here while employing over 8.4 million workers out of the total 12.3 million.
“Reinvigorating small businesses is very important if we are to actually feel the impact of economic recovery,” it added.
(Yonhap)
