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Expanding Financial Capability of Young Entrepreneurs and Start-up Businesses

 Since the end of 2011, the Financial Services Commission (FSC) has been monitoring the performances of small and medium enterprises (SME), and supply and demand of funds available for them. The purpose of monitoring was to avoid economic shock which is likely aftermath of European financial crisis.

On the basis of the monitoring, in February this year, the FSC designed a policy implementation seeking to expand financial capability of young entrepreneurs and start-up businesses. It is because the FSC now recognizes the significant role of young entrepreneurs whose participation is expected to invigorate the economy as a whole, which ultimately leads to sustainable economic development. However, young generation has been hesitant to start up their own businesses as having been constrained by a lack of financial capabilities along with enormous fear of possible bankruptcies.

Taking these limitations into account, the FSC proposes policies to innovate financial environment which will offer favorable condition for young entrepreneurs planning to start their own businesses. To meet this ends, the National Bank Association will establish a non-profit organization called ‘Loans for Supporting Young Entrepreneurs’, and 0.5 trillion Korean Won will be injected.

 A greater extent of flexibility will be introduced so as to grant more loans to young entrepreneurs. Maximum amount of loan available for an individual will be adjusted from 30 million Korean Won to 50 million Korean Won, for the purpose of easing financial constraints faced by young entrepreneurs. In addition, the loan will be granted regardless of profitability of the business since the purpose of this new scheme is to support for start-up business at their initial phases. With this increased flexibility, young entrepreneurs would find it easier to finance setting-up costs for new businesses.

 The benefits of such innovation will not be limited to young entrepreneurs, but rather be shared multilaterally by various economic participants. Individuals other than entrepreneurs themselves will take advantage over increased employment opportunities derived from improvement in business performances. This implies that expanding financial capability of young entrepreneurs and start-up businesses will generate positive spill-over effects, which is to contribute to expand the economic capacity in Korea.

Su Jee An (

The role of Financial Services Commission and its goal

The Financial Services Commission (FSC) was established in March, 2008 for the purpose of protecting the integration of Korea’s financial markets by promoting sound credit system and fair business practices. The establishment was in the aftermath of 2008 Global Financial Crisis (GFC), and since then it has been striving to meet its initial goal as an integrated financial policy making and supervisory authority.

Various policy tools have been introduced, including advancing the financial industry, stabilizing financial markets, establishing a reliable credit system, promoting equitable transaction, and providing protection to consumers. “The fundamental principles are transparency and fairness in order for the policy implementation to attain its intended outcome”, said the Chairman of Commission, Mr. Seok-Dong Kim, on Friday May 11th, during his round-table lunch with the Commission’s student delegate reporters.

During his talk, Mr. Kim emphasized that the Commission is working towards the deregulation of financial market which will benefit not only financial institutions but also individuals. By that means, Mr. Kim mentioned that deregulation needs to be executed ‘at two-tiers’. The first tier is the deregulation between government and financial institutions, allowing financial institutions to run businesses with lesser barriers in the market. The other tier of deregulation is the one between financial institutions and individuals, which is to give individuals more availability of options for financial products and services. Along with the deregulatory regime, Mr. Kim highlighted the importance of micro-credit for low-income earners. By referring to the successful example of micro-credit in Bangladesh, Mr. Kim expressed his concern that granting credit should not be aimed at generating short-term profits. Mr. Kim said, “Micro-credit should be given with due consideration so as to promote sustainable development of the recipient in a way which it enables an individual to build his cornerstone for economic activity on the basis of micro-credit.” These policies ultimately seek to enhance financial stability in Korea as well as promote more favorable condition for financial transactions.

Consistent with its initiative, the Commission has made efforts to create a modern and reliable financial market that is globally competitive. The Commission continues to serve its role of formulating, establishing and enforcing financial policies and regulations to pursue further improvements in Korea’s financial market. Considering the high interdependence between Korea and international economy as a whole, the pursuit of improvement in Korea’s financial market is to contribute to the stability of global economy.

Su Jee An (