SME Financing & Fintech in Korea - UN ESCAP 6_Hyung Seung...SME Financing & Fintech in Korea September 28, 2017 YI Hyungseung 1 Notice: This presentation does not represent KOTEC’s

SME Financing & Fintechin Korea

September 28, 2017YI Hyungseung

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Notice: This presentation does not represent KOTEC’s official opinion.

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

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

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

Alternative Finance Volume(2016)

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CULTIVATING GROWTH -The 2nd Asia Pacific Region Alternative Finance Industry Report

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)

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

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

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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