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SME Financing & Fintechin Korea
September 28, 2017YI Hyungseung
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Notice: This presentation does not represent KOTEC’s official opinion.
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KOTEC
• Korea Technology Finance Corporation– State-run Financial Institution
• For Technology Innovative SMEs• Credit Guarantee & Equity Investment
– Technology Evaluation Agency• Technology Business Rating or Scoring• IP(Intellectual Property) Valuation
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Contents
• SME Financing in Korea– Credit Guarantee
• Fintech service in Korea– Fintech Regulation
• Key words– SME Financing, Fintech, Regulation
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SME Financing in Korea
• Banks– Dominant Position– Credit Guarantee
• Government Policy Fund– Direct Credit from Government Agency
• Corporate Bond• Non Banking Financial Institution
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SME’s External Finance in Korea
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Comparison of Loan Guarantees
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OECD, Financing SMEs and Entrepreneurs 2013
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Credit Guarantee in Korea
KODIT KOTEC KOREG & CGFs
MainCustomer
General SME
Technology Innovative
SME
Local Micro Enterprise
Outstanding(2016)
KRW 44.6T($40Billion)
KRW 21.2T($19Billion)
KRW 18.0T($16Billion)
Established 1976 1989 1996
Ministry FinancialServices
Commission
Ministry of SMEs & Startups
MSS & Local Governments
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Volume of Outstanding Guarantees
8SME and Entrepreneurship Financing (2012) – OECD
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Fintech in Korea
• Provided Service– Mobile Payment– Peer to Peer lending– Crowd-funding– Big data based Asset management
• Internet-only bank– K bank(’17.4)– Kakao bank(‘17.7): mobile only
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SME related Fintech
• Marketplace(P2P) Business lending• Equity Crowd-funding• Working capital related
– Merchant & e-commerce finance– Invoice finance (Factoring)– Supply chain finance– Trade finance
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The Future of Fintech : A Paradigm Shift in Small Business Finance (2015) – World Economic Forum
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Alternative Finance Volume(2016)
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CULTIVATING GROWTH -The 2nd Asia Pacific Region Alternative Finance Industry Report
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Fintech Market Volumes in Korea
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CULTIVATING GROWTH -The 2nd Asia Pacific Region Alternative Finance Industry Report
P2P Real estate Lending 67% (2016)
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Fintech Regulation in Korea
• Emphasis– ‘Financial Customer Protection’– Moving to ‘Innovation Promotion’
• Example– Equity crowd-funding (‘16.1)
• Amendment of Financial investment Services and Capital Markets Act
• Up to KRW 700M($630k) per year
– P2P loan guide line (‘17.2)• Investing limit for ordinary individual: KRW
40M($36K)
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Summary
• SME Finance in Korea– Dependent on Banks & Credit Guarantee
• Fintech in Korea– Mainly Payment service & Consumer finance
• Role of Fintech in Korea– Low credit rated / micro enterprises
• Example: P2P real estate lending
– Collaboration• Banks & Credit Guarantee Institutions
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Future of SME Fintech in Korea
• Background– IT service & infrastructure in Korea– Attitude to New Technology or Service– Internet & Mobile Banking– On-line Shopping with E-payment
• The Future of Fintech in Korea is…..– But how to connect Fintech with SME
Financing?
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SME’s Financing Gap
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Small and Medium Enterprises Financing –UN ESCAP
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SME Financing
• Banking– Credit Guarantee Schemes– Credit Bureau or Registries– Collateral Registries
• Non Banking– Micro Finance– Factoring– Venture Capital
• Capital Market– Stock/Bond
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Small and Medium Enterprises Financing –UN ESCAP
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SME Financing Obstacles
• Information Asymmetry– Lack of Credit history– Difficulty of assessing SME’s credit
• Lack of Collateral• High Service Cost
– As a percentage of loan size – Compared with large corporate
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