A Study On Small And Medium-sized Enterprises Financing System Of South Korea

As the most active force in the contemporary economic activities, the small and medium-sized enterprise (SME) plays an important role in promoting economic growth, increasing labor force, and promoting technological progress. In China, the contribution of SMEs to the national economy is increasing. The industrial production and service value created by SMEs occupy around 60% of GDP, and the taxes paid by SMEs account around 50% of the total. Moreover,65% of invention patents and more than 80% of the new product developments are done by SMEs. However, just like all SMEs in the world, the problem of financing constraints is the main bottleneck in the development of small and medium-sized enterprises. The financing difficulty is a worldwide problem. According to the World Bank's transnational survey,38% of SMEs see the financing constraints as the main obstacles to their development. Since our country is still a developing country, financial development level is low and the financial market is not perfect, the financing difficulties problem is the biggest obstacle faced by our SMEs in the process of their development. SMEs accounted for more than 99% of all enterprises but they occupy less than 30% of the total financial resources. Nearly 70% of SMEs say that they are in a shortage of funds.As our neighbor across a narrow strip of water, South Korea is so large a country with many SMEs as China is. SMEs accounted for more than 99% of all South Korean enterprises. Whether in the early period of economic growth or in the economic booming period or even in the recovery period of economic crisis, SMEs have played an irreplaceable role on economic growth in South Korea, being not only South Korea's industrial base, but fundamental factors of South Korea's social stability. In history, South Korea's small and medium enterprises also experienced a period of lacking funds, financial difficulty, but since 1980s, the South Korean government have issued a series of preferential policies for SMEs, and have established a relatively perfect SME financing system, including indirect financing system, direct financing system and the credit guarantee system, etc. to provide financial supports for SME's stable operating, development and expansion, technological development, product promotion and other activities, as a result to a large extent having solved the financing problem of SMEs. At present, studies of the Korean SME's financing system are rare, if ever, most of these studies describe the system in a very simple level. The innovation of this paper is that it dwells on in detail the composition and operation of South Korean SME's financing system through reading a lot of materials related to SME financing, and then goes into it and summarizes the features, aiming at making a little contribution to addressing the financing difficulty problem of our SMEs.This paper is divided into five parts. The first part introduces the theory of financing for SMEs, namely the financing of static theory, asymmetric information theory and the life cycle theory, explaining financing difficulties of SMEs and SMEs' choosing of financing method from a theoretical point of view. The second part is an overview of the reason of Smes financing constraints and the influence of national economy. The current situation of South Korean SMEs and its significant role in national economy are introduced respectively and South Korean SMEs financing difficulties are stated. The third part which introduces the construction and its operation of various parts of Korean SMEs financing system is the focus of this article. The fourth part analyzes the characteristics of South Korean SMEs'financing system, the main features of which is clear policy sex feature, large banks support, perfect credit guarantee system, sound second board market and so on. The last part is the enlightenment to our country, which is the conclusion. The government must pay more attention to its leadership in the SMEs financing system and strengthen its support for SMEs; establish specialized financial institutions for SMEs in the basis of further deepening banking services for SMEs; improve the credit guarantee system; establish and improve the second board market and the bond market, widening the channels for direct financing of SMEs, to make up for the lack of indirect financing.