According to the Financial Supervisory Service (FSS), bank lending to social enterprises totaled 39.4 billion won (US$36.7 million) in 2013 and is expected to reach 65 billion won (US$60.5 million) this year.
Since the Social Enterprise Promotion Act came into effect in 2007, the FSS says that Korean banks provided an average 10.7 billion won (US$10 million) in loans to social enterprises per year.
Banks offer financing with “soft” terms such as lower interest rates and loans available only to social enterprises. They also provide financial and tax management consulting to social enterprises. All this is done under the watchful eye of the FSS, which evaluates banks’ microfinance initiatives as part of their CSR activities and discloses it to the public every year. One evaluation criteria is the banks’ financial and non-financial support for social enterprises.
In addition to putting pressure on banks, the FSS acts as the liaison between social enterprises and banks. It meets with the leaders of social enterprises to hear from them directly. If there are financial challenges to address, it communicates with bank executives in charge of CSR.
The Korean government established the Social Enterprise Promotion Act on the belief that social enterprises can tame unemployment and create jobs for the disadvantaged. A spokesperson for the FSS explained that when banks increase lending to social enterprises, their projects will grow in size and it will lead to job creation for vulnerable people such as the elderly and people with disability.
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