(2010) Modularization of Korea's development experience : SME financing

(2010) 경제발전경험모듈화사업 : 중소기업 금융

Lee, Jeong Yun; Kim, Bokwang; Chin, Yong Ju; Kim, Hyo-Eui(Author)

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This chapter examines the establishment and roles of Industrial Bank of Korea, the only government-owned bank specializing in small and medium sized enterprises (SMEs) in Korea. The review consists of four parts, covering the background of IBK, its establishment and growth over a half century, its roles and achievements, and comprehensive insights and implications.

Section 1 provides the historical background for the foundation of IBK by describing the economic situations in the 1950s. In the 50s, the aftermath of the Korean War stroke the economy and the government was struggling to restore the economy. In order to promote the all-around economic expansion, it was considered indispensable to support SMEs and resolve their financial difficulties as they comprised a large proportion of the national industry.

Section 2 discusses the process of establishment of IBK from the outset to the official promulgation in 1961, examines its development over time, and analyzes its structure. It was first designed in 1957 and, after going through formal procedures, launched its business in 1961. By continuously expanding deposits and strengthening the bank’s competencies to support SMEs, it has supported and fostered SMEs for about fifty years. As the industry tended toward technology-required, knowledge-intensive, the roles and sizes of SMEs grew large, and so did the roles of IBK. Currently, the bank consists of 12 Business Divisions, 1 Research Institute, and 41 Departments.

Section 3 describes the roles and major achievements in detail. Established as a Korea’s first-of-its-kind bank, exclusive for SMEs, it serves to stabilize the economy when in crisis, rescue and foster SMEs, and build comprehensive support system. It makes credit loans for SMEs with growth potential, tighten up loan policies when necessary, promotes modernizing facilities with the supply of facility funds, explore high-performing businesses, conducts statistical research and provides information useful for business operators. The sound functioning of IBK was especially critical in the 1997 financial crisis and in 2008 world financial crisis.

The chapter is concluded with the discussion of insights and implications. The unparalleled economic growth of Korea transformed the nation from the ruins of the Korean War to an export rank 9th nation in the world as of 2009. Many say it would have been not possible without the contribution of IBK. The success story of IBK provides a good development model for many developing countries.

Issue Date
KDI School of Public Policy and Management
Economic Policy
Chapter 01 Establishment and Roles of Industrial Bank of Korea

Summary (12P)

1. Background of Industrial Bank of Korea (13P)

2. Establishment and Growth of Industrial Bank of Korea (26P)

3. Roles and Major Achievements of Industrial Bank of Korea (49P)

4. Comprehensive Insights and Implications (89P)

References (94P)

Appendix (95P)

Chapter 02 Establishment of Korea Credit Guarantee Fund and Its Operation

Summary (100P)

1. Establishment of KODIT (104P)

2. Key Aspects of KODIT (110P)

3. Procedure of the Establishment of KODIT (124P)

4. Performance of KODIT’s Credit Guarantee System (142P)

5. Policy Implications (151P)

References (160P)

Appendix 1. (161P)

Appendix 2. (169P)

Appendix 3. (170P)
Series Title
(KSP) Modularization of Korea's Development Experience ; v.2010-3
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