Streets are nearly empty in central Seoul on Dec. 17, 2020. (Yonhap)
SEOUL, June 21 (Korea Bizwire) — The “Yellow Umbrella” support system, a mutual aid fund for small businesses in South Korea, has made significant disbursements this year to businesses that are shutting down.
Benefits were paid out to companies going out of business in a total of 48,000 cases between January and May this year, which represents a 51.3 percent increase compared to last year, according to Rep. Yang Kyung-sook of the Democratic Party, citing data from the Ministry of SMEs and Startups and the Korea Federation of Small and Medium Businesses.
The total amount disbursed, 554.9 billion won (US$429 million), was 66.4 percent higher than last year.
The number of cases in which benefits were paid out to companies going out of business grew from 75,000 in 2019 to 95,000 in 2021, setting a new record since the establishment of Yellow Umbrella in 2007.
However, last year saw a slight drop to 91,000 cases.
Aggregate payments grew from 614.2 billion won in 2019 to 968.2 billion won last year, reaching a record high.
“Yellow Umbrella’s mutual aid for business shutdown is akin to severance pay for small businesses that lack it,” said Choo Mun-gap, departmental head at the Korea Federation of Small and Medium Businesses.
“It serves as a last bastion, exempting them from disbenefits and confiscations resulting from failure to repay bank loans or taxes. It demonstrates the extent to which small businesses are being pushed to the brink.”
The loan delinquency rate is also increasing.
According to data submitted by the Bank of Korea to Rep. Yang, the aggregate value of loans issued to self-run businesses at the end of the fourth quarter last year surpassed 1 quadrillion won, setting a new record.
The delinquency rate for the fourth quarter last year was 0.26 percent, marking a 0.07 percentage point increase from the previous quarter.
It was the highest in two and a half years, following the second quarter in 2020 when the pandemic began to spread.
H. M. Kang (hmkang@koreabizwire.com)
