South Korea’s startup credit score ecosystem faces rising stress after revelations that KRW 4.8 billion (~ USD 3.5 million) in assured loans from the Korea Know-how Finance Company (KIBO, also referred to as KOTEC) have been misused for unauthorized functions. The invention of KIBO’s mortgage misuse circumstances highlights how the nation’s key expertise financing establishment is fighting inside oversight, restricted personnel, and a quickly increasing portfolio of startups counting on public assure funds.
Mortgage Misuse Raises Oversight Considerations for KIBO
Latest information submitted by Democratic Occasion lawmaker Lee Jae-kwan to the Nationwide Meeting’s Business, Commerce, and SMEs Committee revealed 26 confirmed circumstances of mortgage misuse between 2016 and 2025, totaling KRW 4.82 billion.
These findings additional spotlight long-standing weaknesses in monetary oversight throughout public establishments, following a number of previous incidents of fund misuse inside businesses underneath the Ministry of SMEs and Startups (MSS).
Inside Korea’s government-backed startup financing system underneath Korea Know-how Finance Company (KIBO), the misuse circumstances included private use of funds by firm representatives (6 circumstances), loans to affiliated companies or compensation of shareholder money owed (7 circumstances), inventory or treasury share purchases (3 circumstances), and different violations equivalent to embezzlement or irregular consulting funds (10 circumstances).
One firm was even discovered to have diverted KRW 100 million (~ USD 74,000) right into a CEO’s private account earlier than declaring chapter. In the meantime, one other lent funds to an affiliate regardless of assure restrictions. A 3rd used KRW 1 billion (~ USD 740,000) of its mortgage to repurchase shares and subsequently misplaced its KIBO assure.
Of the entire funds misused, solely 35 p.c (KRW 1.69 billion) has been recovered. Some corporations concerned are at present underneath rehabilitation applications or the federal government’s New Begin Fund debt aid framework.
As a response, KIBO said that such circumstances signify “a really small fraction in comparison with over 20,000 ensures issued yearly” and infrequently stem from “non permanent liquidity difficulties relatively than deliberate fraud.”
Oversight Gaps Regardless of Safeguards
KIBO, a government-backed establishment established to assist technology-driven SMEs safe financing, launched a devoted loan-use account system in 2018 to stop misuse. All non-collateralized assure loans are required to go by these unique accounts, with six months of post-disbursement monitoring.
Nevertheless, even after the reform, 20 new misuse circumstances value KRW 4.67 billion (~ USD 3.4 million) occurred between 2019 and 2024. Critics argue that whereas coverage mechanisms exist, the implementation stays reactive and depending on branch-level guide monitoring.
KIBO’s inside construction exhibits the size of pressure: as of September 2025, 326 officers are liable for managing 81,975 assured companies, which means that one officer should deal with a median of 252 corporations.
The group claims that discipline employees “greatest perceive their purchasers’ monetary realities.” Nevertheless, policymakers nonetheless query: can such workloads permit for efficient supervision?
Requires Stronger Governance for Korea’s Coverage Finance
Rep. Lee Jae-kwan emphasised that KIBO’s oversight gaps might weaken public belief in Korea’s coverage finance establishments:
“As a coverage finance company supporting technology-based SMEs, KIBO should reinforce its administration system to make sure assured loans are used strictly for his or her meant functions. Clear steerage needs to be given from the applying stage, and steady post-monitoring should be institutionalized.”
Business analysts additionally observe that repeated misuse circumstances danger undermining the integrity of Korea’s broader startup credit score ecosystem, notably as extra high-risk deep-tech ventures rely upon guarantee-based financing relatively than direct fairness funding.
Coverage Finance Beneath Pressure: Classes from the KIBO Case
The KIBO case underscores a structural problem in Korea’s innovation finance mannequin. As public assure applications increase to cowl a rising variety of early-stage tech ventures, restricted human oversight capability and fragmented monitoring programs go away important room for governance lapses.
This situation carries implications past KIBO. Korea’s broader coverage finance community, together with the Small and Medium Enterprise Company (SBC) and Korea Credit score Assure Fund (KODIT), faces related challenges in sustaining transparency and accountability because the variety of supported startups grows.
If left unaddressed, such oversight gaps might weaken investor confidence in Korea’s startup help framework, undermining the nation’s drive to realize its Third Enterprise Increase and its broader objective of changing into an innovation-driven monetary hub and one of many world’s prime 4 enterprise powerhouses.
A Smarter, Clear Future for Korea’s Coverage Finance
Finally, together with the earlier incidents from MSS businesses, KIBO’s mortgage misuse revelations additional level to the very important want for digital oversight frameworks, together with AI-based fund monitoring and built-in information sharing amongst monetary regulators. Strengthening transparency and accountability can be essential for sustaining the credibility of Korea’s public funding ecosystem.
As Korea strikes deeper into its Startup Korea and Digital Finance methods, guaranteeing that each assured gained is used for innovation—not misuse—will decide how successfully the nation’s coverage finance system can help its subsequent technology of startups.
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