South Korea’s Financial Services Commission and Ministry of SMEs and Startups, along with the five major financial holding groups (KB, Shinhan, Hana, Woori and NH NongHyup Financial), have begun a full-scale shift toward productive finance to support ventures and startups. The plan is to expand private-led supply of risk capital and upgrade the startup support system to strengthen the growth base for innovative companies.

The FSC and the SMEs ministry on April 30 signed a business agreement in Seoul’s Gangnam Tipstown with the five financial holding groups and related institutions for “boosting venture investment, the Startup Project for Everyone and a major shift to productive finance”. The event was attended by the heads of both ministries, the chairmen of the financial holding groups and key figures from policy finance and guarantee institutions.

The agreement was prepared to shift money flows focused on real estate and households toward innovative companies and to strengthen finance’s role in supporting growth. The government will encourage private participation through tax support, and the financial sector will build a support system combining investment, guarantees and nurturing functions.

The key is expanding risk capital. The five financial holding groups will create a private venture fund-of-funds totalling 800 billion won by 2029, starting with 400 billion won this year.

Support for growth after investment will also be strengthened. The financial holding groups will use overseas networks to provide linked support for investor relations, follow-on investment, initial public offerings and overseas expansion, underpinning the fostering of unicorns.

Support for early-stage startups will also be expanded. The five groups will contribute 20 billion won to the “Startup Project for Everyone” and, based on that, establish a new agreement-based guarantee worth 150 billion won. The plan is to reduce the burden of early funding by fully waiving guarantee fees and applying a 100 percent guarantee ratio. Regional startup support using Kookmin Bank’s local track guarantee worth 100 billion won and incentives for companies participating in auditions will also be pursued.

In addition, a full-cycle support system from startup to growth will be established by linking mentoring by experts from the financial holding groups, cooperation with affiliated venture capital firms and banking-sector acceleration programmes.

Individual financial holding groups are also detailing their implementation plans.

KB Financial will create a fund-of-funds worth 100 billion won and seek to expand investment by 1 trillion won over the next 5 years. Shinhan Financial will expand to investment of about 1 trillion won based on a 100 billion won fund-of-funds and focus on investment centered on advanced industries. Hana Financial will build a 400 billion won fund-of-funds and an integrated financial support system over 4 years, and Woori Financial will also create its own fund-of-funds worth 100 billion won in total and strengthen support by linking agreement-based guarantees and its startup nurturing programme, Dinolab.

The government plans to expand cooperation with the financial sector, focusing on managing policy funds and discovering promising companies, and to continue policy support for fostering regional commercial districts and key industries.

Minister of SMEs and Startups Han Sung-sook (한성숙) said, “The Startup Project for Everyone to bring forward a national era of entrepreneurship is a task of the times.” She added, “This agreement will be a starting point that connects the startup and venture ecosystem with the expertise and resources of the five major financial groups.”

Financial Services Commission Chairman Lee Eok-won (이억원) said, “The core of productive finance is creating a structure in which funds are supplied when needed.”