Chairman Kim Kyu-ok of Korea Technology Finance Corp.(KOTEC) gives a speech on the 4th Industrial Revolution at the Korea Federation of Banks in downtown Seoul on April 27.

Chairman Kim Kyu-wok of Korea Technology Finance Corporation (KOTEC) said that KOTEC will be at the forefront in helping technology-intensive firms that went belly-up get back on their feet by providing financial support.

At a media briefing the chairman held to mark his 100-day anniversary in office at the Korea Federation of Banks on April 27, he said KOTEC will increase financial support to technology-intensive firms, especially those seeking to develop technologies related to the 4th Industrial Revolution, including AI and IT being developed in fusion with other industrial technologies. 

He said KOTEC will boost financial support to firms with great potential to further develop technologies connected with the new industrial revolution.

Chairman Kim took over as the CEO of KOTEC in January to put his experience as former official of the Strategy and Finance Ministry (MOSF) in good use. He was the assistant minister for Planning and Coordination at MOSF before he was named as the deputy mayor in charge of economic affairs for Busan Metropolitan City.

KOTEC (also known as KIBO in Korean) is a non-profit government agency responsible for operating a loan guarantee scheme specifically for high-tech SMEs in Korea. It is often targeting high risk, technology intensive SMEs which are often considered too risky to receive normal bank loans. 

As there is another organization providing credit guarantee service to the SMEs such as Korea Credit Guarantee Fund (KODIT), KOTEC was motivated to develop the KIBO Technology Rating System (KTRS) to provide differentiated service to its customers. As the loan guarantee provider, KOTEC gets its funding from fees paid by financial institutions for the guarantee service and from guarantee fees paid by companies. 

Technology Appraisal System 

The overall aim of the KTRS system is to identify and support those companies who have strong technology and strong business prospects, but who would not qualify for a loan under a normal credit analysis because of low collateral. The system aims to provide a quantitative analysis of a company’s business prospects based on the technology that it possesses. These prospects are quantified in terms of a technology rating grade. 

This technology rating grade (TRG) determines whether or not a company will be supported for a loan guarantee. The final grade is derived from a weighted-average combination of two factors, a risk level (i.e. default rate) and a technology level. The technology level is a quantification of the company’s technological and commercial viability. A company’s technology level is determined by how it is rated against several different indicators. These indicators fall into four top-level categories (management competence, technical feasibility, marketability and business feasibility and profitability). Based on the result or TRG (AAA to D), SMEs with high TRG can get more credit guarantee at a low guarantee fees and a low interest rates. 

The KTRS system differs from a credit rating approach in several aspects. The typical credit rating approach focuses on financial aspects and history of the company. However, the KTRS approach focuses on the company’s future potential and non-financial aspects, such as the technology excellence and business feasibility are dominant in the appraisal. This is particularly suited to analyzing the potential of small companies and start-ups which do not have a much financial history. Trust in the KTRS system seems quite high as it has been selected as a best practice at the InnoPartnering Forum, which is sponsored by the European Commission (EC). 

A view of the building where KOTEC has its head office in Busan.(Photos: KOTEC)