The Bank of Korea (BOK) will extend for six months, through the end of July next year, a temporary measure that supports low-interest lending to small and midsize businesses.

The Bank of Korea's monetary policy committee said on the 15th it voted to extend the operation deadline for the temporary special support for small and midsize businesses under the 14 trillion won financial intermediary support program (FISP).

Rhee Chang-yong, governor of the Bank of Korea, presides over a plenary meeting of the Bank of Korea's monetary policy committee at the Bank of Korea in Jung-gu, Seoul, on the 15th in the morning. /Courtesy of News1

The FISP is a system in which the Bank of Korea (BOK) lends funds to commercial banks at low interest rates to support small and midsize businesses. Each bank sets the lending rate for small and midsize businesses by considering the FISP support rate and support ratio. The FISP rate is currently around 1% per year. If commercial banks reduce their funding expense through this program, small and midsize businesses can ultimately borrow at cheaper rates.

The Bank of Korea (BOK) allocated 80% of the total limit to 15 regional branches and the remaining 20% to the Seoul area, considering the difficulties of regional small and midsize businesses. Low-credit small and midsize businesses and the self-employed are eligible. However, some sectors, such as bars and real estate, are excluded.

The Bank of Korea (BOK) said, "Recovery in vulnerable areas such as regional small and midsize businesses and the self-employed has been delayed, so we judged it necessary to continue support," and added, "We expect it will help improve small and midsize businesses' access to finance and ease the burden of financial expense."

Meanwhile, with this extension, the temporary special support for small and midsize businesses under the FISP is scheduled to stop new lending starting Aug. 1. The Bank of Korea (BOK) said, "Within this year, we plan to restructure the FISP to strengthen its function as a monetary policy tool," adding, "During the restructuring, programs introduced and operated on a temporary basis will be terminated in a timely manner, and we will improve and supplement the program to strengthen flexible operation capacity in response to changes in economic conditions."

Previously, the FISP was first introduced in Jan. 2024, operated for six months with a 9 trillion won limit, then extended twice more with the limit increased. It had been scheduled to run through the end of this month at 14 trillion won.

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