South Korea planned to launch 2 trillion won ($1.8 billion) worth of funds to enhance access to the equity capital market by small, venture companies with innovative technology, the financial regulator said Wednesday.
"Our growth ecosystem showed shortfall in fund inflow into startup and venture companies that have high risks due to their uncertainties and asymmetric information," Financial Services Commission (FSC) Vice Chairman Jeong Chan-woo told reporters at a briefing.
The so-called "growth ladder fund" worth 2 trillion won will be launched within this year to boost access to the equity capital market by venture companies, leading to the creation of ecosystem without such shortfall, said Jeong.
Small businesses in South Korea have depended on bank loans for 99 percent of their financing, raising burdens for interest payment.
The growth ladder fund, which will be composed of 0.6 trillion won in public funds and 1.4 trillion won from the private sector, was anticipated to help the small companies with innovative technology raise capital through the equity capital market rather than depending on bank loans.
The fund planned to be launched in August this year in the form of funds that have various sub-funds to invest into startup companies in the early stage and growth companies in the mid-stage.
The government money will offset possible losses from the investment by making a high-risk investment, while the funds from the private sector will have the priority right to low, stable gains from the investment.
The size of the fund, which will be launched worth 2 trillion won, will be widened to 6 trillion won over the next three years, comprising of 2 trillion won in government money and 4 trillion won from the private sector.