Value context and insight. lkm@koreatimes.co.kr
Red tape baffles virus-hit SMEs
In this March 4 photo, a sign on the door of the Daegu Small Enterprise and Market Service says it cannot process any new coronavirus-related hardship loan applications for the day as the daily limit of 200 had already been lodged. Yonhap
By Lee Kyung-min
Cash-strapped small biz irked by lack of manpower
By Lee Kyung-min
Many small- and medium-sized enterprises (SMEs) hit hard by the rapid spread of the new coronavirus continue to experience difficulty in taking out loans, due mostly to a lack of manpower to process their requests coupled with overall administrative inefficiency.
Experts said Sunday that the supposed fiscal stimulus, utterly lacking in follow-up execution measures, is leading to a faster deterioration of the livelihoods of the most vulnerable in the economy. They added that the focus should have been on how best to help the most in need in an effective and efficient manner rather than obsessing over how much money should be allocated.
According to Small Enterprise and Market Service (SEMS), a quasi-government organization supervised by the Ministry of SMEs and Startups, it takes up to three months for a borrower to go through the loan process from start to finish.
This is about six times the normal time it takes to process out one of the most common credit guarantee-mediated loans; usually about one week or up to two weeks in some cases.
Owners of SMEs are seeking a particular type of loan for which banks must have a guarantee from regional branches of the Korea Federation of Credit Guarantee Foundations. The foundation approves eligibility requirements after SEMS-submitted papers substantiate the extent and degree of how earnings of the businesses have dropped under certain “adverse” circumstances.
Requirements for submission include tax returns, business registration certification, state-run health insurance premium payment receipts, and records showing year-on-year decrease in sales figures for certain months.
Chief among the reasons delaying the process is a lack of manpower that remains roughly the same as before the virus spread.
The Daegu branch of SEMS accepts no more than 200 requests per day, and even a single minor mistake on paper pushes the applicant to the back of the queue.
The number of requests easily surpasses 200, hours before the end of the business day, leaving many loan seekers frustrated.
“I have not had a single customer since the beginning of this month,” said the owner of a snack eatery whose primary customers are elementary and middle school students.
“The schools delayed the beginning of the semester because of the virus and I don't know when the scare will die down. I can't make a living and need a loan right now, and I don't understand why the government cannot hire more workers temporarily to help people like me whose daily lives are crashing,” said a resident of the area hit hardest by the new coronavirus.
The Financial Services Commission (FSC), belatedly, plans to increase the number of workers at branches showing a spike in applications after finalizing specifics with the SMEs ministry.
“The review department has been experiencing a great shortage over the past couple of weeks. New support measures will be implemented as early as this week,” an FSC official said.
The incident illustrates the “height of the government's inefficiency,” according to Seoul National University economist Kim So-young.
“The fiscal stimulus is doing little to stimulate the economy as the government fails to grasp the sense of urgency felt by most of the small business owners,” he said.
“Any government fiscal plan should be about how best to immediately help those most in need backed by thorough follow-up measures, not making some grand statements about trillions of won in taxpayers' money to be spent,” he said.