Chairman Suh Geun-woo of Korea Credit Guarantee Fund(Kodit).

Small and medium-sized enterprises (SMEs) serve as the root of the national economy. However, SMEs suffer from limited access to financing due to the high administrative costs of small-scale lending, asymmetric information, high risks attributed to SMEs and a deficiency in collateral. 

In order to alleviate this problem, Korea Credit Guarantee Fund (KODIT) was founded in June 1976 by the Korea Credit Guarantee Fund Act. Its objective is to lead the balanced development of the economy by extending credit guarantees for SMEs that have future prospects but lack tangible collateral and by stimulating sound credit transactions through the efficient management of credit information. KODIT is a public financial institution providing comprehensive support for SMEs. With its capital fund of US3.2 billion, KODIT provides 11 types of general credit guarantees and P-CBO guarantee. As of the end of 2005, the outstanding credit guarantee reached over US31.6 billion. 

In addition, KODIT operates credit information management, guarantee-combined investment, credit insurance, management consulting and infrastructure credit guarantee services. Throughout its history, KODIT has actively supported the SMEs of Korea, thereby promoting economic vitality, easing the inequalities within the economy and instilling the importance of credit. In particular, KODIT played a crucial role in reviving the economy by implementing government policies at every financial crisis and stabilizing the market. Its contribution was clearly shown in the studies that proved production inducement, economic value added inducement and job creation effect of credit guarantee service. 

The credit guarantee services by the agency are to facilitate the financing of SMEs through the credit guarantees and stimulate the sound credit transaction through the efficient management of credit information. 

KODIT's capital funds are the financial resources prerequisite for KODIT to maintain its public trust, to provide credit guarantee, to make payment under guarantees and to earn revenue from managing surplus capital funds. The main sources of the capital funds are the contributions from the government, financial institutions and enterprises. The contribution from the government is subject to change every year depending on the government's policy on credit guarantees. 

On the other hand, according to the KODIT Act, all banks in Korea have to contribute funds to KODIT. These contributions, a main systematic tool for raising capital funds, are calculated on the balances of banks for specific loans at a certain rate not exceeding 0.3 percent per annum. 

The aggregate amount of outstanding credit guarantees cannot exceed In terms of credit insurance services, the agency has two kinds a bill insurance service and a receivables insurance service. KODIT introduced the former in 1997 and the latter in 2004 to protect SMEs from chain reaction bankruptcies arising from dishonored commercial bills or non-payment of receivables for the goods and services that SMEs provided to buyers. It also introduced Korea Infrastructure Credit Guarantee Fund (KICGF) in 1994. 

Initially, KICGF was operated by three institutions Korea Development Bank, Korea Technology Credit Guarantee Fund, and KODIT. It then took over the funds of the other two institutions and became the sole operator of KICGF. 

The goal of infrastructure credit guarantee services is to help private investment corporations obtain funds for facility construction. Infrastructure credit guarantee services have played a significant role in securing the financing of private investment corporations that lack more than 20 times the capital funds.

A view of the building in Seoul where Kodit has its office.(Photos:Kodit)