The number of financially struggling small- and medium-sized enterprises (SMEs) is on the rise amid sluggish domestic demand resulting from the prolonged period of high interest rates and inflation.
Worsening business conditions have led to an increasing number of companies failing to meet their contractual obligations, such as delivering goods, resulting in a rise in guarantee insurance payouts.
The Composite Business Sentiment Index (CBSI) for SMEs, disclosed by the Bank of Korea (BOK) in September, plummeted to levels seen during the height of the COVID-19 pandemic in September 2020, while their bankruptcy filings are steadily increasing as well.
According to Rep. Kim Jae-sub of the ruling People Power Party, Tuesday, total insurance payouts made by Seoul Guarantee Insurance (SGI) amounted to 548.4 billion won ($406 million) as of the first half of this year.
Guarantee insurance is intended to cover cases where contractual obligations between businesses, such as the delivery of goods or payment for services, 스포츠 are not fulfilled.
Kim said, if this trend continues, SGI’s insurance payouts will exceed 1 trillion won this year and reach an all-time high.
The payouts amounted to 699.8 billion won in 2019, 673.2 billion won in 2022 and 884.8 billion won last year.
Notably, insurance payouts for SMEs totaled 518.5 billion won last year and have already reached 325.6 billion won in just the first half of this year.
“The economic difficulties faced by SMEs and individual business owners are shaking the foundation of our economy,” Kim said.
“The sharp increase in guarantee insurance payouts due to the recession signals that companies are reaching the limits of their financial capacity.”
