South Korea said it would form a 500 billion won ($430 million) fund to help lower borrowing costs for small and medium companies.
Public institutions will contribute to the fund, the finance ministry said in a statement without specifying which agencies would participate. Twenty state-owned funds and 10 public institutions will deposit “extra cash” into the facility, which will be used from August, according to the statement.
The measure to aid small companies comes amid a worsening sovereign-debt crisis in Europe that threatens to curb the nation’s exports and stem job growth. Borrowing costs for small firms with lower credit ratings often exceed a 10 percent annual interest rate, the ministry statement said.
As many as 2,000 small-to-medium companies will benefit from the fund, Hong Nam Ki, head of the economic policy coordination bureau at the finance ministry, told reporters in Seoul today. The measure could lower borrowing costs by as much as 2 percentage points annually, Hong said.
Local banks are expected to bid to co-manage the fund along with the Industrial Bank of Korea (024110), according to the finance ministry.
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