The Financial Services Commission (FSC) has officially taken up the matters related to turning Korea Technology Credit Guarantee Fund (Kibo) into a corporation, with the fund now reassigned to the Ministry of SMEs and Startups as a government-affiliated organization.
FSC will consider such matters as turning the technology credit guarantee fund into something comparable to Silicon Valley Bank (SVB). It will have a variety of financial functions, including investment banking and accelerating support for startups, as a professional financial entity to support venture capital firms.
SVB in the United States is a financial organization in Silicon Valley, California, with diverse financial roles, including investing and providing loans to startups and consignment, with 43 trillion won in capital. Since 1983, when it first opened for business, the company provided loans and invested in over 30,000 startups in the area. President Kim Kyu-ok said the technology credit guarantee fund should be run like a venture firm. To do its job more fully, he said it has to be upgraded to a professional business-type corporation with an integrated financial platform.
Kibo would be able to perform like a corporation working for profit just as the Korea Asset Management Corp. and Korea Land and Housing Corp. have been doing, legally entitled to run businesses. Kibo will continue to issue technology credit guarantees as it has been doing , while taking charge of acceleration and investments as among its new businesses as a corporation.
But Kibo will be unable to be of help to SMEs and startups during the 4th Industrial Revolution, with its functions severely limited, Kibo officials noted.
Kibo will have completed its reorganization plan when it converts into a corporation in its mid-to long-term management plans. It includes setting up eight new departments and units in the next five years, starting with a technology research center in 2018 and a technology fusion center and climate, technology financial center in 2019 followed by a global business center in 2022.
The plans also involve a recruitment plan this year, which will be boosted to 70 new employees including 10 interns, up 75 percent year-on-year, compared to 45 last year.
Kibo also plans to hire 10 professionals with doctorate degrees in such areas as cultural contents, machinery, electronics and electric, metallic raw materials, applied chemistry and statistics, among others, in a bid to boost its expertise as a technology evaluation organization. It will also be looking for six accountants for hire.
Kibo’s plan has been drawing criticism that it may come into conflict with similar plans of other financial institutions, such as the Industrial Bank of Korea, the Korea Development Bank and the Korea Credit Guarantee Fund.
KOTEC (also known as KIBO) is a non-profit government agency responsible for operating the loan guarantee scheme specifically for high-tech SMEs in Korea. It is often targeting high risk, technology intensive SMEs which are often too risky for normal bank loans. As there is another similar organization which provides credit guarantee service to the SMEs such as Korea Credit Guarantee Fund (KODIT), KOTEC was motivated to develop 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.
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.