A scene from the Kodit-sponsored public hearing on social economic enterprise model held on Nov. 30 at the Korea Federation of Banks building in Myung-dong, Seoul. (Photo: Kodit)

Korea Credit Guarantee Fund (KODIT) held a public hearing on the Social Economic Enterprise Model on Nov. 30 at the Korea Federation of Banks building in Myeong-dong, downtown Seoul, in cooperation with the Korea Social Enterprise Promotion Agency (KoSEA) and the Hankyorei Social Economic Research Institute.

The event took place to discuss the standard social value model being developed by KODIT and “Coop-Index” to collect various useful ideas to back up the government’s announcement in February on ways to spur social finance, with some 150 people from all walks of life including finance, the business community, and social economic experts in attendance, KODIT said.

The standard social value model is an objectively measured model with the extent of realization of social value, and the capacity for repayment of debts so that the financial institutions can use it for credit evaluation before extending loans.

Coop-Index is the joint evaluation standard used by KODIT and the KoSEA to judge the individual monetary contribution for members of KoSEA and limiting the tenures of chairman, which was put together reflecting KoSEA’s democratic governance realization standard levels.

Professor Kim Jae-koo of Myungji University presided over the public event. Kodit will announce the final evaluation model in December, reflecting various ideas presented at the event.

Managing Director Kim Hyo-myung of KODIT said the body will not only work on direct financial support for the social economic enterprises, but also on expanding its infrastructure and the development of evaluation models so that the social financial market will settle down successfully and stably. Korea Credit Guarantee Fund (KODIT) is a public financial institution established in June 1976 under the provisions of the KODIT Act.

As stipulated in Article 1 of the Act, the main purpose of the fund is to lead a balanced development of the economy by extending credit guarantees for the liabilities of promising small- and medium-sized enterprises (SMEs) which lack tangible collateral.

In an attempt to meet SMEs' demand for financing services, the state-run agency provides enterprises with credit guarantee services for the repayment of liabilities assumed by business enterprises in transactions with other companies or institutions.

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.

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 the collateral for loans but have acceptable credit standings and strong prospects.