Credit Guarantee Management Under Economic Crisis and Measures to Boost Economy

1. Credit Guarantee ManagementUnder Economic Crisis and Measures to Boost Economy The 19th ACSIC Training Program Bangkok, Thailand 9th – 14th, August 2009 1 1

2. Contents • SMEs’ difficulties in Financial Crisis 2. Strategy to support SMEs 3. Intensive Rescue Plan for SMEs 4. KODIT’s Contribution 2 2

3. 1. SMEs’ difficulties in Financial Crisis Sluggish World Economy Decline of Exports Global Financial Crisis Real Economy Contraction Restriction To borrow In foreign currency Credit Crunch Volatile Financial Market Decreased Liquidity Domestic Economy Downturn 3 3

4. Drop of Domestic Consumption Rise of Raw Material Price Decrease in Construction investment Rise of Foreign Currency Financial Expenses Strong Knock-on Effect in Construction Industry Export SMEs’ Difficulties Construction SMEs’ Difficulties 1. SMEs’ difficulties in Financial Crisis Decline of Exports 4

5. Revision of Guarantee System New Guarantee Programs Special Contributions 2. Strategy to Support SMEs Support SMEs suffering from Liquidity Shortage Credit Guarantee Expansion 5

6. 3. Intensive Rescue Plan for SMEs 3-1. Expanding Credit Guarantee • Outstanding Credit Guarantee had been decreasing since 2004 • We began to expand Credit Guarantee from June, 2008 2009 plan New Guarantee Provision : KRW 25.2 trillion Outstanding Credit Guarantee : KRW 46.6 trillion 6

7. 3. Intensive Rescue Plan for SMEs 3-2. Revision of Credit Guarantee System 1 Higher Ceiling Amount • Maximum guarantee amount go up to 10(from 7) in General Guarantee, 1,000(from 500) in P-CBO Guarantee (※unit : billion of KRW) Wider Coverage Ratio • It was ranged 50%~85% depending on Credit Rating → 95% to 100% (startup, contributed guarantees) 2 Prompt Guarantee Support • ARS [Automatic Rating System] is introduced • 2 Class : under KRW 50 million, under 100 million 3 7 7

8. 3. Intensive Rescue Plan for SMEs 3-2. Revision of Credit Guarantee System Rollover of Existing Guarantees • Annual percentage payback obligation of guaranteed loans will be suspended till the end of 2009 4 Expanding an Eligibility of Guarantee for Performance • Guarantee for SMEs in the construction sector as the demand for execution of contracts • Private companies are now eligible 5 8 8

9. 3. Intensive Rescue Plan for SMEs 3-3. New Credit Guarantee Product Special Guarantee for SMEs under Fast-Track Program Guarantee for Bridge Loans of Construction Companies Guarantee with Collateral for Micro Companies P-CBO Guarantees Guarantee for Young Entrepreneurs for Startups Special Contribution and Agreement Guarantee Program 9

10. 3. Intensive Rescue Plan for SMEs Fast-Track Program • In cooperation with Banks, KODIT provides guarantee through faster support scheme • Eligible SMEs - companies damaged by foreign currency option (KIKO) - companies that have liquidity problems 10

11. 3. Intensive Rescue Plan for SMEs • Procedure • Performance • SMEs hit by foreign currency-option losses such as KIKO : KRW 29 billion • SMEs suffering from loquidity shortages : KRW 500 billion • Target Amount for 2009 : KRW 500 billion in total

12. 3. Intensive Rescue Plan for SMEs Guarantee for Bridge Loans of Construction Companies • Help a Construction company borrow bank loans to carry out a construction project • Guarantees are provided for loans secured with the right to receive money from the owner of the project 12

13. 3. Intensive Rescue Plan for SMEs • Procedure • Performance KRW 107 billion in 2008, KRW 342 billion in 2009(as of the end of June, 2009) Target Amount for 2009 : KRW 2 trillion 13

14. 3. Intensive Rescue Plan for SMEs Guarantee with Collateral for Small Company • Purpose : To ease for bank to roll over existing loan and provide new loan to small company by taking the price down risk of collateral • Eligible company : Manufacturing, Construction, Mining, Transportation business which employ under 10 employees • Proportion of Guarantee : 100% • Ceiling of Credit Line : KRW 7 billion • Credit Line : Collateral value of real estate 14

15. 3. Intensive Rescue Plan for SMEs P-CBO Guarantees • Reinforcing the credit of individual company that can not access to the Bond market because of Credit gap and Size gap 15

16. 3. Intensive Rescue Plan for SMEs • Procedure • Performance : Target Amount for 2009 is KRW 3.2 trillion 16

17. 3. Intensive Rescue Plan for SMEs Guarantee for Young Entrepreneurs for Startups • KODIT contributes to job creation by encouraging young people lacking capital to establish startup businesses • Under a special agreement between KODIT and 4 banks, young entrepreneurs would get the lowest interest rate for loans • All banks are eligible to use this guarantee program 17

18. 3. Intensive Rescue Plan for SMEs Guarantee funded by Special Contribution from Commercial Banks • Commercial banks make special contributions to KODIT in installments until the end of 2009 depending on the performance • KODIT guarantees loans up to 12 times the each bank’s contribution 18

19. 3. Intensive Rescue Plan for SMEs Guarantee funded by Special Contribution from Large Enterprises(LEs) and Banks • Support subcontractors of LEs with the funds contributed equally by LEs and Banks (LEs : Hyundai motor company, Posco, Hynix) 19

20. 4. KODIT’s Contribution 4-1. Key Performance Annual Plan (A) Performance (1st Half, B) B/A Higher Ceiling Amount 14.9 (Trillion KRW) 11.4 (Trillion KRW) 76.5% New Credit Guarantee 1 46.6 (Trillion KRW) 43.1 (Trillion KRW) 92.5% Outstanding Credit Guarantee 2 20

21. 4. KODIT’s Contribution 4-2. KODIT’s Contribution Guarantee for Bank Loan(A) Bank Loan for SMEs(B) Portion (A/B) 31.9 (Trillion KRW) 422.4 (Trillion KRW) 7.6% Higher Ceiling Amount Dec.2008 7.2 Tr. KRW 16.2 Tr. KRW 1.3%p 39.1 (Trillion KRW) 438.6 (Trillion KRW) 8.9% Jun.2009 21

22. Thank you • Ahn, Jung Yol jyahn@kodit.co.kr • Byun, Ja Yeon jayeon@kodit.co.kr 22