The Role and Competitiveness of IBK as SME Loan Provider in Korea

Abstract

The Industrial Bank of Korea (IBK) is a government-funded financial institution aiming to provide capital to SMEs and a commercial bank that funds a significant portion of its resources from private depositors. The purpose, operation and governance structure of IBK is public and therefore subject to government support and regulation, while it is exposed to competition from other private commercial banks in Korean domestic banking market. Although the Korean economy has a structure that is largely led by large business groups, the protection and upbringing of SMEs has been a constitutional value, and none of the previous governments has neglected the SME sector promotion. The establishment of IBK in 1961 is an essential evidence of the Korean government's steadily developing SME policy. As of 2015, the total asset of IBK amounts at KRW 225 trillion which is equivalent to that of commercial banks. Morevoer IBK has ranked the overwhelming number one position in SME loan banks. In particular, in the systematic credit crunch period, such as the 2008 global financial crisis, IBK lent boldly to SMEs. Recently, IBK is leading in finance for cultural contents industry and technology finance. IBK is a nice example of Korea's policy finance as well as a system that can be introduced to overseas developing countries while exemplifying a proper and efficient combination of government support and private capital while carrying out public functions as a national bank.