[강연] Supply Chain Finance in S. Korea

When I returned from the Persian Silk Road trip in July 2016, I was requested to speak about "supply chain finance in Korea". At first, I declined the request so as to give such a good opportunity to other younger scholars than I in the sixties of age.

 

A few days later, a staff member of the Korea Federation of Banks insisted on my presentation because he could not find an alternative speaker about this topic in a short period of time. After all, I accepted the offer and prepared an article.

The occasion was 2016 Korea-China Banking Development Forum co-organized by the Korea Federation of Banks and China Banking Association.

 

o Topic: Korean-Chinese Banking Industry's Transformation, Innovation and Development

o Date: 14:00-20:00, Friday, September 2, 2016

o Venue: Paradise Hotel, Busan, Korea

 

* Prof. Park's presentation

SCFinance_0902.pptx

SCFcn_1609.pdf (underlying article in Chinese)

 

Prof. Park's explanation of "Supply Chain Finance in South Korea" is as follows:

 

In Korea, the concept “supply chain” has increasingly attracted entrepreneurs. But the supply chain finance (SCF) has failed to make bankers get interested in such topic. As a matter of fact, its apparatus has been set in motion. For example, the legislation which allows SMEs to use machinery and equipment in use as security for additional financing (called the "Act on Security Interests in Movables, Receivables, etc.") has been enforced with relevant electronic registration of collateralized assets. Also SMEs’ accounts receivable to be paid by big corporations become the security basis for their banks to make online loans to such suppliers in place of proceeds to be paid by buyers. The recent amendment of the Commercial Act included provisions of financial lease, franchise and factoring which are usually favored by SMEs.

 

However, bankers’ lackluster response to supply chain finance would be changed into enthusiasm by taking advantage of supply chain platforms which enable financiers to have access to related information on a consolidated basis. The financial scandal caused by Moneual was enlarged to unprecedented damages to lenders because of some blind spots in the ex post management of loans. Sharing necessary data information among such platform users including manufacturers, suppliers, banks, transporters, etc. is supposed to prevent unfaithful participants from committing any breach of contract. Timely advice on financial assistance could be available to clients in need. Furthermore, brand new services will emerge to meet needs for proper appraisal and monitoring service of new types of security.

 

To this end, an appropriate SCF platform should be in operation to make a virtuous cycle of ecosystems among supply chain participants. Manufacturers, suppliers, banks, etc. participating in the platform may exchange data and information necessary to seek and discuss new business chances and financing schemes. In the long run, American type of asset-based lending (ABL) could be used by banks and SMEs with timely services of appraisers, field examiners and liquidators.

 

If necessary, active/passive RFID tags as well as smartphone-based NFC tags may be used to identify and monitor 24 hours a day collateralized assets by creditor-banks. The resultant database will be utilized for fair assessment of security and search for would-be buyers of such collateral to be liquidated. If such databases are accumulated on a nationwide IoT basis, additional profit will be created by big data-based logistics and other services.

 

Corporate credit rating would be necessary for such SCF platform to be properly operative. For the efficient operation of SCF platform, it should be accessed and managed by mobile phones. Collaboration among SCF participants, and their extension to big data and fintech services will be inevitable. Cross-border provision of SCF-related services calls for more transparency in transactions than ever before.