annual report 2014kodit.co.kr/annualmgt/annual_20151019172115.pdf · 2015-10-19 · annual report...

ANNUAL REPORT 2014VA LU E C R E ATO R , G U I D I N G T H E WAY TO

A H A P P Y W O R L D F O R E N T E R P R I S E S

03ANNUAL REPORT 2014

CONTENTS

MESSAGE FROM THE CHAIRMAN & CEO

OVERVIEW

MANAGEMENT STRATEGY & RISK MANAGEMENT

MAJOR PERFORMANCES

FINANCIALS & GOVERNANCE

Highlights of 2014

Economic Trends of 2014

SME Trends of 2014

01.

02.

03.

Vision

Ethics Management & Customer Satisfaction

Risk Management System

01.

02.

03.

Capital Funds

Credit Guarantee Services

Major improvement in Guarantee

System & New Products

Default & Debt Collection Management

Credit Insurance Services

Infrastructure Credit Guarantee Services

Startup Support Services

International Affairs

2014 Major Events in KODIT

01.

02.

03.

04.

05.

06.

07.

08.

09.

Financial Statement

Governance

Board of Directors

Organization Charts

01.

02.

03.

04.

08101 1

04

202 125

282930323335

384 14244

141617

MESSAGE FROM THE CHAIRMAN & CEO

05ANNUAL REPORT 2014

April 2015

Seoh, Geun WooChairman and CEO

We also selected 40 IPO candidates to support small giants

and provided a stepping-stone for promising SMEs with

SMART convergence guarantees worth USD 385 million, while

investing a total of USD 22 million through guarantee-aligned

equity investment.

Furthermore, we set forth a business innovation plan under

the slogan ‘ACE for Creative Economy’ and installed specialized

units called Creative Finance Centers to carry out the plan. As

part of our innovative efforts, exemptions of joint surety were

allowed for best sta rtups to kindle entrepreneurial spirits.

In 2015, the economic growth rate is expected to increase slightly

with the help of drop in oil prices and the government’s

continued efforts to revive the economy. At the same time,

however, foreign and domestic risks such as the U.S. interest

rate hike, increased household debt, and the lost luster of the

so-called growth engine are still looming.

This year has been meaningful for KODIT, as it relocated its

head office to the city of Daegu. Through ceaseless innovation

and close cooperation with related organizations in Daegu,

we will strive to solidify our status as a leading public

financial institution that promotes creative economy, while

strengthening our local presence in Daegu. As we embark

on this new journey, I would like to ask for your continuous

support and encouragement.

Thank you.

In 2014, Korea’s real GDP growth rate recorded 3.3%, 0.2%p

higher than the world’s average, thanks to the government’s

aggressive fiscal policy and the private sector’s innovation

efforts. However, there was a gap between the growth rate

and the business sentiment of small and medium-sized

enterprises (SMEs), stemming from the prevailing imbalance

between growth rates of large enterprises and SMEs.

KODIT, against this backdrop, put forth its utmost effort to

revive the Korean economy and promote the development

of SMEs. We supplied new guarantees worth USD 9.9

billion, underwrote credit insurance of USD 13.8 billion, the

largest amount since its outset, provided USD 2 billion of

infrastructure guarantee to facilitate the PPP project, and

issued P-CBO worth USD 2.6 billion.

In recognition of these efforts, KODIT was awarded the

Korea Service Grand Prize in public financial services for two

consecutive years, making it the first public institution to

receive such acknowledgment. Our endeavors did not go

unnoticed by the government either – we obtained approval

to establish four new branches in Songdo, Gimhae, Dalseung,

and Dangjin and have better access to SMEs across the nation.

KODIT will actively confront these challenges by playing a

leading role in enhancing SMEs’ competitiveness. Guarantees

of USD 4.7 billion, 55% of the USD 8.6 billion annual target,

will be provided in the first half year. Underwriting amount

of credit insurance will be raised to USD 14.1 billion and the

scope of eligible enterprises will be expanded to enhance

marketability.

Furthermore, KODIT will foster a favorable environment for

startups by inducing a virtuous cycle that consists of ‘Startup-

Leap-Growth-Rechallenge’. Credit guarantee assessment

criteria will be revised with a stronger emphasis on future

growth potential, while the scope of the joint surety

exemption will be extended to alleviate the fear of failure

among entrepreneurs. The function of the Creative Finance

Center will be strengthened for intensive support on startups

and the Rechallenge Units will be spun off from branch offices

to better support SMEs rebounding from failure.

07CONTENTS

OVERVIEW

081011

Highlights of 2014

Economic Trends of 2014

SME Trends of 2014

01.

02.

03.

01Highlights of 2014

OVERVIEW 09OVERVIEW 08

5.9

2010 2011 2012 2013 2014

5.85.4

5.2

6.0

Capital Funds(Unit: USD billion)

40.7

9.3

2010 2011 2012 2013 2014

38.6

9.0 10.3

40.7

9.9

41.239.5

8.4

Guarantee Supplies(Unit: USD billion)

Total Guarantee Supplies

New Guarantee Supplies

Default Rate(Unit : %)

4.7

2010 2011 2012 2013 2014

4.84.2 4.0

4.9

Recovery of Indemnity(Unit: USD million)

Recovery of Indemnity

Outstanding Balance of Indemnity

2,66

2

2,74

0

2010 2011 2012 2013 2014

2,91

5

3,07

2

3,16

9

Underwriting of Credit Insurance(Unit: USD million)

Underwriting of Credit Insurance

Outstanding underwriting

5,42

8

5,96

3

6,30

6

12,0

45 13,8

36

1,08

6

1,18

4

1,27

9 2,20

8

3,05

6

2010 2011 2012 2013 2014

Approvals for Infrastructure Credit Guarantees(Unit : USD million)

Outstanding Approvals for Infrastructure Credit Guarantees

Approvals for Infrastructure Credit Guarantees

2010 2011 2012 2013 2014

5,40

8 6,16

5 6,98

9 7,71

6

7,41

1

1,73

5

1,37

1

1,47

1

1,43

3

1,81

9

* Exchange rate: \1,099.20/$ (BOK reporting rate of exchange as of Dec 31, 2014)

701

661

664

496

521

02Despite a slow domestic growth rate of the first half of 2014 due to the drop in consumer

confidence and capital expenditures, triggered by the Sinking of the MV Sewol, the Korean

economy saw a mild recovery during the second half with the expansionary fiscal policy, the

drop in oil prices and a recovering economy of developed countries. The real GDP growth rate

in 2014 recorded 3.3% and GNI per capita USD 28,180, increased by 7.6% from the previous year.

The private consumption expenditures increased only by 1.7% per annum, even with

economic recovery, due to the drop in consumer confidence, the increase in household debt,

the decline in spending capacity, etc. Plant and equipment investment rates did not show

clear improvement compared to the previous year even though the amount of investment in

some parts such as transportation equipment showed increase, as a result of the uncertainties

of internal/external environments and lower domestic demands.

Exports (on a customs clearance basis) increased 2.4% from the previous year as the economy

saw improved terms of trade, higher sales records from its major sectors such as the IT industry

and increase in exports to EU and USA. Also, imports rose by 2.0% from the previous year with

the increase in imports of consumer goods. However, producer prices were decreased for 2

consecutive years since 2013 due to decrease in production costs, caused by the sharp decline

in oil prices, the drop in raw material prices, etc.

Economic Trends of2014

OVERVIEW 11OVERVIEW 10

03SME Trends of 2014

In 2014, SMEs suffered from the stagnant domestic market due to reduced private

consumption expenditures despite an upward trend in exports in the midst of the global

economic recovery and increased sales of major products such as semi-conductors and IT

equipment/devices.

The average (mean) operating ratio of SMEs in manufacturing recorded an improved outcome

of 72.5% (year-end), little difference from the previous year; however, it still remains low

compared to the overall average of the entire sector. The production index slightly improved

from the year before, but the inventory index decreased due to the increase in demand,

caused by drop of producer price index.

Meanwhile, SME lending recorded USD 475 billion, USD 30 billion increase compared to

the previous year as the government expanded policy finance assistance on SMEs and as

financial institutions treated it more favorably. The SME loan interest rate was lowered by 0.32%,

improving SMEs’ financing conditions. With the increase of collateral loans and low-interest

credit loans, the amount of guarantees issued to SMEs was decreased.

Average ManufacturingOperation Ratio

Industry Average (%)

SMEs Average (%)

2010 2011 2012 2013 2014

82.5

72.0

77.7

72.1

78.4

70.3

76.2 76.1

72.3 72.5

6.3

1,06

7

1,15

8

1,24

0

1,29

9

1,12

4

2010 2011 2012 2013 2014

2.3

3.0 3.33.6

Real GDP Growth Rate

Nominal GDP (USD billion)

Real GDP (%)

Major Economic Indices2014

National Wealth(Nominal)

1,2991,362

28,180

• GDP (USD billion)• GNI (USD billion)• GNI per capita (USD)

Growth Rate (Real)

3.37.6

• GDP (%)• GNI (%)

Price Increase Rate

Δ0.51.3

• Producer Price Increase (%)• Consumer Price Increase (%)

Currency Exchange Rate

2010

1,0671,069

20,562

6.35.6

3.83.0

1,138.9

2011

1,1241,127

22,451

3.61.5

6.74.0

1153.3

2012

1,1581,164

22,708

2.02.6

0.7 2.2

1,071.1

2013

1,2401,310

26,205

3.04.0

Δ1.61.3

1,045.0 1088.5(KRW/USD)

2014

Production Trend

• SME Loans(USD billion)• Interest Rates on Loans (%)

Numbers of Newly Incorporated Companies

2011 2012 2013Major Economic Indices

• Production Index in Manufacturing (Year 2010=100)• Average Operation Ratio of SMEs in Manufacturing (%)

4754.60

84,697

414 6.00

65,110

4195.66

74,162

102.272.5

104.972.1

105.370.3

106.872.3

445 4.92

75,578

13CONTENTS

Value Creator, Guiding the Way to a Happy World for Enterprises


1416

17

Vision

Ethics Management &

Customer Satisfaction

Risk Management System

01.

02.

03.

Future Status

Value Creator

Value Creator beyond Policy-Oriented Finance

Leading Co-Prosperity with Customers through Value Creation

Goal

Guiding the way

Providing comprehensive and Tailored Services to Enterprises

Guiding to Enterprises’ Success as their Lifetime Partner

Business Target

Enterprises

Broadening the Eligibility Criteria to All Enterprises

Future Status

Value Creator

Putting the First Emphasis on the Enabling World for the Entrepreneurs


15MANAGEMENT STRATEGY & RISK MANAGEMENT

14

KODIT’s Effort in realizing the Creative Economy

Since 1976, KODIT has continuously strived to drive SME growth and improve the financial

industry for the past 38 years. It has especially contributed to overcoming national economic

crises by proactively and promptly responding to severe deterioration of managerial

environments during the Asian financial crisis and the global financial crisis.

Since 2013, it put its utmost effort in realizing the creative economy by setting the goals in

“KODIT, Always Alert”, “KODIT, Best Service to Customers”, “KODIT, with Expert and Excellence” in

accordance with the slogan “ACE for Creative Economy”.

It also continued to fulfill its mission and vision by remodeling its business goal into “Fostering

50,000 Innovation pioneer enterprises,” “Creating 100,000 jobs,” “Maintaining 50% of debt

ratio,” “Achieving the highest rating in customer satisfaction,” reflecting changes in business

environment in domestic and foreign markets.

KODIT will continue to show its commitment as a leader of the creative economy, to drive SME

growth, and to improve the financial industry.

01Vision

Value Creator, Guiding the way to a Happy World for Enterprises

＞

Contribute to the Expansion of SME Growth and the Development of the Financial Industry

Value Creator, Guiding the way to a Happy World for Enterprises

Customer Satisfaction Financial Soundness Change-oriented

Fostering 50,000 innovative

pioneer enterprises

Creating 100,000 jobs

Maintaining 50% of debt ratio

Achieving the highest rating

in customer satisfaction

＞＞

＞

Vitalizing CreativeEconomy

Strengthen the support program for vitalizing the creative economy

Invigorating the financial market

Diversification of financial support system

＞

Strengthen policy-oriented

guarantee system

Expansion of business safe-net for enterprises

Strengthen ability for implementing policy

＞

Advancing risk management system

Strengthen management of

capital fund

Enhancing the efficiency of business

＞

Efficient promotion of government 3.0

program

Enhancing the role as a public institution

Advancement of corporate culture

Expanding NationalGrowth Potential

Enhancing the Financial Soundness

Maximize the Customer Value


17MANAGEMENT STRATEGY & RISK MANAGEMENT

16

03Risk Management System

02EthicsManagement and Customer Satisfaction

KODIT has constructed an integrated risk management system and credit evaluation system

to efficiently manage the underlying assets and leverage ratio and to propose better policy

decisions and has responded to internal and external changes as well as crises.

Credit Evaluation System

The Corporate Credit Rating System(CCRS) developed by KODIT has been in use since 2001 for

utilizing in various service areas such credit guarantee and credit insurance. KODIT introduced

the Startup Business Scoring System(SBSS) in 2007 which reflects characteristics of startup

enterprises that have little financial information.

KODIT also introduced the Automatic Rating System(ARS) in 2009 for simplified credit review

of guarantee applications. This caused credit analysis and review processes to be remarkably

simplified and improve customer service since decisions on approval are made automatically

by the system.

Integrated Risk Management System Integrated

RiskManagement

System

Efficient Management of Capital Funds and Leverage ratio

Risk AssessmentPrediction

Risk Diversification

Early Warning

Credit Risks

Credit-VaR System

Liquidity Risks

Leverage Ratio Management System

Operational Risks

Operational Risk Management System

Scenario Analysis

Portfo

lio Management

＞

Ethics Management

Customer Satisfaction

Outcomes

KODIT defined ethics management as a system improvement and educational activities

to have transparent and accountable management with full social and environmental

responsibilities internally and externally.

Consequently, KODIT provided ethics courses to its employees to develop their sense of

ethics and morality and carried out autonomous system improvement to promote anti-

corruption environments. It also encouraged active participation from its customers in ethical

management through its policies on ethics and corruption reporting systems.

KODIT introduced the Cham Cham Cham Campaign under the theme of “true assistance, true

enterprise, and true happiness” in order to raise the standard of customer satisfaction in 2013.

The Campaign has proven its effectiveness as the customers rated employees and their service

mentality more favorably.

KODIT carried out ‘CS Clinic,’ ‘CS Training through musicals,’ ‘Online training program’ to enhance

the CS mind-set people. Also, KODIT spreaded CS know-how, which can be applied to the real

business world by operation ‘Customer Surprise Story,’ ‘Customer Praise Voice,’ ‘Complaint X-file’

through its bulletin board system and so on.

KODIT has organized the Customer Advisory Panel composed of 1,381 representatives of

guaranteed firms, practitioners at related organizations, and experts in various fields to

reflect diverse suggestions and opinions on its business plans. It also conducts the customer

satisfaction survey that regularly examines the customer satisfaction and any inconvenience

and operates the Dream Call Service that daily collects and responds to customers’ suggestions

and complaints.

Moreover, it has reinforced its customer-friendly services by reflecting the results of customer

service inspections constantly conducted based on the Customer Service Charters to the

overall business plans.

KODIT has received the highest rating (outstanding) from the investigation of customer

satisfaction on quasi-governmental organizations conducted by the Ministry of Strategy and

Finance for five consecutive years through consistent improvements on customer satisfaction

structures. In 2013 and 2014, two consecutive years, it also became the first public institution

to win the Korea Grand Prix organized by the Korea Standards Association for its various efforts

for customer satisfaction and the outcomes.

Integrated Risk Management System

The integrated risk management system, composed of the Credit-VaR system that measures

credit risks, leverage ratio management system that manages liquidity risks, and operational

risk management system that controls operational risks, manages the optimal guarantee

portfolios to promote risk distribution, while also complying with the government’s guarantee

policies. It efficiently manages the underlying assets and leverage ratio by enhancing quick

reaction capabilities with scenario analyses for economic changes.

19CONTENTS

MAJOR PERFORMANCE

202 125

282930323335

01.

02.

03.

04.

05.

06.

07.

08.

09.

Capital Funds


Major improvement in

Guarantee System & New Products

Default & Debt Collection Management

Credit Insurance Services

Infrastructure Credit Guarantee Services

Startup Support Services

International Affairs

2014 Major Events in KODIT

MAJOR PERFORMANCE 21MAJOR PERFORMANCE 20

Leverage ratio calculated by dividing the credit guarantee amount at a given period by the

underlying asset is a measure that indicates capability to supply guarantees in accordance with

government policies and guarantee as well as demands payment capacity for subrogation to

banks. Article 25 of the Credit Guarantee Fund Act prohibits the leverage ratio higher than 20.

The ratio stands at 8.5 as of 2014.

Accumulated Contributions to KODIT (Unit: USD billion)

2010 2011 2012 2013 2014

10.2 10.2 9.9 9.9 10.0

8.0 8.8 9.5 10.3 11.0

0.6 0.8 0.8 0.9 1.0

Special Contribution

Financial Contribution

Government

* Special contributions include contributions from large enterprises, financial institutions and local government

Capital Funds and Leverage Ratio of last 5 years(Unit: USD billion, Times)

Classification

43.15.97.3

2010

41.46.06.9

2011

41.35.87.2

2012

43.25.48.0

2013

44.15.28.5

2014

Total Outstanding Guarantee(A)

Capital Funds(B)

Leverage Ratio(A/B)

01Capital Funds

The basis for conducting businesses such as credit guarantees and credit information

management, the underlying assets of KODIT are composed of contributions as stipulated in

Article 6 of the Credit Guarantee Fund Act.

The government contribution may vary every year as it is determined after comprehensive

evaluation on the guarantee operation and economic outlook; contributions from financial

institutions are determined within the annual rate of 0.3% on their corporate loans and

become stable fund sources of KODIT. Other financial institutions, corporations, and local

government bodies provide occasional contributions under separate business agreements.

Cumulatively with USD 10 billion from the government and USD 12 billion from financial

institutions and corporations the underlying asset of KODIT at the end of 2014 reached USD

5.2billion.

02In 2014, KODIT set a basic objective of “Stronger functions as a policy finance institution to

enhance economic vitality” to lead domestic economy hit by depression and deteriorated

global financial environments to recovery; it provided the best effort on credit guarantee

supply by improving countercyclical measures through liquidity assistance on SMEs and

through corporate-friendly business systems.

KODIT actively expanded its guarantee services, introducing more policy-oriented guarantee

assistance (e.g. economic vitalization programs and job creation) and new guarantee schemes

to establish a basis for the creative economy.

Consequently, KODIT provided credit guarantees worth USD 44,082 million in 2014. The

general credit guaranteed amount was USD 37,443 million, increased by USD 524 million

from the year before. The amount of special guarantee for market stabilization increased by

USD 1,107 million while amount of P-CBO decreased by USD 704 million. The total supplied

guarantee amount was USD 41,246 million, increased by USD 593 million whereas the new

supplied guarantee amount was USD 9,937 million, decreased by USD 406 million.


Guarantee Performance(Amount Unit : USD million)

Total Supplied Guarantee & New Supplied Guarantee Amount (Amount Unit : USD million)

Classification

Classification

General Guarantee

P-CBO Guarantee

Special Guarantee for Market Stabilization Guarantee on Bridge Loan

Bond Market Stabilization Fund

Construction P-CBO Guarantee

Market Stabilization P-CBO

Special Guarantee for Bank Capital Enhancement

Total Guarantee

Total Supplied Guarantee

New Supplied Guarantee

36,919

3,103

3,13465–

1,5611,148

359

43,155

40,653

10,344

37,443

2,398

4,2407–

9543,279

–

44,082

41,246

9,937

524

Δ704

1,107Δ58

–Δ6072,131

Δ359

926

593

Δ406

2013

2013

2014

2014

Change

Change


Outstanding of guarantee for bank loan at the end of 2014 was USD 32,001 million or 85.4% of

the entire guarantee amount. Both guarantees for loans from non-banking finance institution

and guarantees on collateral for business transaction both increased, whereas guarantees for

commercial bill and surety bond decreased.

By Type of Guarantee

The manufacturing and wholesale and retail sales sectors accounted for 76.8% of the overall

guarantee amount, recording 36.3% and 40.5%, respectively. The proportions of manufacturing

and business service sectors increased from the year before while those of wholesale and retail

sales and construction saw a drop in guarantee amount.

By Type of Industry

Outstanding General Guarantee by Type(Amount Unit : USD million)

Classification

30,383258

04

1,2011,871

3201,700

35,736

31,509251

02

1,1381,964

2671,788

36,919

32,001250

01

5882,060

2332,310

37,443

2012 2013 2014

Guarantee for Bank Loan

Guarantee for Payment Warrant of Bank

Guarantee for Corporate Bond

Guarantee for Tax and Duty

Guarantee for Commercial Bill

Guarantee for Loans from Non-banking Financial Institution

Surety bond

Guarantee for Transaction Liability

Total Amount

KODIT strengthened its guarantee services by designating exporting firms, services firms with

growth potential, startups and plant and equipment investments as “priority sectors” to comply

with government policies on future growth drivers and job creation in 2014. Consequently,

guarantee supplies for priority sectors increased by USD 1,292 million from the year before.

Guarantees to Priority Sectors

Guarantee Supplies to Priority Sectors(Unit : USD million)

7,779 4,731

10,263 4,280

35,736

8,290 4,961

10,706 4,388

28,345

2013 2014

Export-oriented Enterprises

Promising Service Enterprises

Startups

Plant and Equipment Investment

Total Amount

Outstanding General Guarantees by Type of Industry(Unit : USD million)

2013

53,140107,940

21,16023,65917,176

223,075

12,19815,927

3,0992,9092,786

36,919

No. of Enterprises Amount

2014

54,620101,784

19,42323,95315,905

215,685

13,58815,178

2,8473,1152,716

37,443

No. of Enterprises AmountClassification

Manufacturing

Wholesale & Retail Sales

Construction

Business Service

Others

Total Amount

KODIT introduced the P-CBO guarantee scheme in July 2000 to promote corporate

competition and stabilize capital markets after the Asian financial crisis, which caused

difficulties in corporate bond markets during the corporate restructuring process.

The P-CBO guarantees became one of the main businesses of KODIT through amendments of

the Credit Guarantee Fund Act in May 2009. Consequently, SMEs were able to access the direct

financial market with corporate bonds worth USD 947 million in 2012, USD642 million in 2013

and USD 101 million in 2014.

KODIT also reinforced its liquidity assistance on various economically weak sectors such as

competitiveness and shipbuilding. Solution to the overall issues on stagnant corporate bond

market, KODIT had introduced the ‘market-stabilizing P-CBO guarantees’ in July 2013 to help

revolving corporate bonds which are about to be expired. In 2014, the guarantee amounts of

USD 2,131 million was supplied by new issuance and revolving.

P-CBO Guarantee

P-CBO Guarantees(Amount Unit: USD million) 642

497947 662

521 446

101 103

20132012 2011 2014

P-CBO Guarantee Supplies

No. of Enterprises

Classification

Classification


In 2014, KODIT implemented guarantee policies aimed to reinforce tailored-guarantee support

based on customer types and improved operational efficiency. Also, KODIT carried out a

guarantee policy for leading new growth and take off such as domestic economic recovery

and creative financial market.

Improvement in Guarantee Systems

Corporate valuation (CV) is an evaluation on not only tangible assets of a firm but also the

ability to generate profits that will lead to continuous growth and development in the future.

CV was introduced in September 2010 to selectively assist firms with future growth potential

and profitability despite their currently low credit ratings.

KODIT enhanced the consistency of CV by constructing the intellectual property evaluation

model that assessed the “intellectual properties,” including knowledge and human resources,

not appropriated as assets. It contributed to assisting SMEs with high growth potential by

supplying guarantees worth USD 8,502 million to 8,337 firms with good CV from 2010 to 2014.

Expanded Corporate Valuation

CV Guarantee( Amount Unit: USD million)

4,037 3,654

2,209 2,472

1,064 1,182

8,337 8,502

201420132012 Total

Number of Firms

Amount

Classification

9011,073

2011

126 122

Sep. 2010 - 2012

03Major Improvement in Guarantee Systems & New Products

2014 Major Improvement Enacted & Amended

Purpose

MaximizePolitical Function

Enacted & Amended Details

Customer-oriented Guarantee Operation

Guarantee support to relieve SMEs affected by Avian Influenza, oil spills and snowfall

Implemented the crisis related-special guarantees

Guarantee support to help SMEs which face operational difficulties due to the Sinking of the MV Sewol

Implemented special guarantee related to the Sinking of the MV Sewol

Guarantee support to the eligible enterprise for the creative finance

Organized a specialized team to provide total services of relationship banking (creative finance center)

Remodeling customer classification system Remodeled the system of customer classification and management

Form a tailored job creating program that reflect characteristics of hiring based on stages of SMEs growth

Introduced the program for companies related to job creation or high quality-job creating best company

Construct a virtuous cycle system of business by building an environment which business failure can rechallenge

Expanded re-startup guarantees

Extend preferential guarantee rate on startup, export, green business, high-tech business by 12.31.2014

Extended preferential guarantee rate on temporary special guarantee & core sector

Provide services based on growth road map to high growth potential SMEs which selected as a Best-Value company

Implemented guarantee on high-value promising service company

Waive joint surety for startup entrepreneur with excellent techImplemented guarantee on best startup

Provide preliminary review of pre-entrepreneur with best idea and high-tech before establishing a business in order to expedite processing of guarantee supports after startup

Implemented guarantee on pre-entrepreneur startup

Operate tailored program on promising startupSupport, financially and non-financially, promising enterprise with high growth potential which were selected as “First Penguin”

Introduced promising startup growth support program

Expand method of application of expected revenue, when calculating guarantee limit

Amended guarantee support on startup

Adopted intellectual property evaluation table by the industry in the future value evaluation system Segment future value evaluation rate (5 different credit ratings → 9 different credit ratings)

Improved evaluation of future value and intellectual property value

Eliminate lists of ID numbers of management and shareholders Enhance responsibility of employees about credit information related incidents

Enhanced protection of customer credit information

Enhance professionalism of small-amount guarantee review in order to expedite processing of guarantees for an eligible company

Forming specialized evaluation of small-amount guarantee team

Electronic collection of patent rateCollected tax proof certification from Hometax automaticallyCollected patent evaluation info automatically

Support for Startup


New Products

Promising Startup Growth Support Program is a tailored guarantee support program which

assists a promising startup which owns technology and creativeness, but faces a financial

difficulties, from pre-startup to startup growth stages. KODIT organized tailored-support and

demand-oriented system based on life-cycle of startup in order to lead creative economy.

In 2014, KODIT restarted guarantee-aligned equity investment after the revision of the Korea

Credit Guarantee Fund Act in May 2013. It was enacted to improve financial structures of SMEs

with direct investment (guarantee-aligned) which have high potential but face difficulties to

access private investment market.

KODIT invested in 55 SMEs with worth of USD 48 million since its start of investment in 2005

to 2010 After guarantee-aligned equity investment became enacted in 2014, KODIT invested

worth of USD 22 million in 27 SMEs. At the end of 2014, outstanding investment reached to

USD 30 million to 39 SMEs.

In 2005, a ‘Guarantee-aligned equity investments’ was introduced after the government

announced its ‘comprehensive measure to support SMEs’ competitiveness’ in July 2004, But in

2011, KODIT stopped providing new investment as the National Assembly and the Board of

Audit and Inspection pointed out lack of legal ground.

Promising Startup Growth Support Program

Guarantee-aligned Equity Investment

In October 2014, KODIT set the introduction of ‘the IPO 100 Project’ plan in order to help

revitalize capital market by supporting SMEs’ Initial Public Offering(IPO). KODIT will select

SMEs as IPO candidates which have high possibilities to be large global companies with their

excellent technology and great future growth prospects and then offer non-financial support

such as consulting for investment and IPO so that more than 100 SMEs will be able to be listed

on KRX or invested by a institutional investors. In 2014 KODIT selected and supported 40 SMEs

by the program.

IPO-100 Project PlanGuarantee Limit

Guarantee Fee

Coverage Ratio

Non-financial Support

Charged organization

6mon before startup

within 1year after startup

within 1~3years after startup

within 3~7years after startup

Pre-startupStage Startup Early Stage Growth Stage

Eligible for assistance

USD 1 million (inc. facility fund)

0.7% fixed rate

100%

USD 1 million

0.4% deduction

100%

USD 2 million

0.3% deduction

95%

USD 3 million

0.2% deduction

90%

Provide management consulting when needed

Business branches, Creative finance center Business branches

Outline of Promising Startup Growth Support Program

Performance of Promising Startup Growth Support Program (newly issued guarantee)(Amount unit: USD million)

Pre-startupStage

775

No.

52

Amt

Startup

2,469

No.

939

Amt

Growth Stage

1,994

No.

719

Amt

Total

4,334

No.

2,718

Amt

2014

Early Stage

3,254

No.

1,008

Amt

Performance of Guarantee-aligned Equity Investment(Amount unit: USD million)

Classification Balance

30

39

Total

70

82

2014

22

27

2013

-

-

2012

-

-

2011

-

-

2010

6

8

2009

9

11

2008

9

9

2007

9

10

2006

9

9

2005

6

8

Investment amount

No of enterprises


04Default & Debt Collection manageent

Five Year Trends of Default & Default Rate (Unit : USD million, %)

Default

Default Rate

The default in 2014 was lowered by USD 54 million thanks to the external factors such as a

rebound in economic growth rates and an increase of medium-term loans and internal causes

such as an increase in outstanding guarantee, which was raised by USD 524 million. As a result,

the default rate stood at 4.0%, 0.2%p decrease from the previous year.

Defaults

4.7 4.9 4.8

4.2 4.0

1,65

1

1,72

2

1,72

8

1,55

8

1,50

4

2010 2011 2012 2013 2014

2,14

0

29,264

2,72

9

30,122

2,56

6

32,0473,

013

33,770

3,30

0

34,839

2010 2011 2012 2013 2014

Management of right of indemnity is crucial to sustain credit guarantee businesses by

increasing the underlying assets. Reducing guarantee default rates and exercising the right

of indemnity through efficient management are important for financial independence of

KODIT. In 2014, the amount of subrogation-payment under guarantee was USD 1,592 million,

a USD 40 million drop from the previous year. The subrogation rate and net subrogation

rate were 4.3%, 3.3% respectively, decreases of 0.1% p and 0.2% p from the year before. As

KODIT attempted to recover the debt as much as possible by revitalizing firms through debt

adjustments and by improving management efficiency of the right of indemnity through

expanded real-time credit information of debtors, it recovered USD 521 million, including USD

300 million (USD 26 million increase from the previous year) of which came from the principal

obligor, representatives, and actual executives, in 2014.

Debt Collection Management

Performance of Debt Collection( Amount Unit: USD million)

Classification

Outstanding Credit Guarantees(A)

Default(B) Default Rate(B/A)

Net Subrogation(a-b) (Net Subrogation Rate)

Total Collection

2013

36,919

1,5584.2

1,291(3.5)

496

37,443

1,5044.0

1,219(3.3)

521

524

Δ54Δ0.2

Δ73(Δ0.2)

25

2014 Change

* Excluding P-CBO Guarantees

05Credit Insurance Services

KODIT has been conducting credit insurance services in accordance with Article 6, Section

2 of the SME Promotion Act since 1997. Such services not only provide the social safety net

that prevents chained bankruptcies of SMEs due to bad debts, but also help SMEs enhance

their survivability and competitiveness, thereby contributing to inducing market-friendly

environments.

KODIT introduced Bill Insurance Services in 1997 and Receivables Insurance Services in 2004

to protect SMEs from managerial difficulties arising from dishonored commercial bills or non-

payment of receivables for the goods and services that SMEs provided to buyers. In 2011

KODIT introduced “Two-in-One” market friendly insurance service to help SMEs cover the risk

from non-payment of buyers and obtain bank loans. In 2014, KODIT implemented customer-

friendly simple insurance system to expand the base of receivable insurance services and

strengthened its role of policy finance by invigorating the policy insurance such as mutual

growth insurance and venture·innobiz agreement insurance etc and improved its soundness

of insurance portfolio by introducing CIRS (Credit Insurance Rating System), which reflects the

characteristics of insurance and integrated risk management system.

The underwriting amount has been increasing continuously since its introduction of sales

receivable insurance in 2004. KODIT underwrote USD 13,836 million, increased by about 15%

from the year before through the government’s contribution of USD 93 million in 2014 while the

accident rate dropped through improvement of risk management. KODIT strengthened its role as a

safety net as it paid insurance money to the insurance applicants, which affected by bad debts and

acted actively as a political function of prevention from the chained SMEs bankruptcy.

Performance

2012

6,30640

6,266

15,5752,992

12,583

2009

4,844 129

4,714

12,6268,5264,100

2010

5,428 74

5,354

14,3425,9058,437

2011

5,96349

5,914

15,9113,934

11,977

Performance of Credit Insurance Services(Unit: USD million)

Classification

Total Underwriting Amount Corporate Bill Insurance

Sales Receivables Insurance

No. of enterprise Corporate Bill Insurance

Sales Receivables Insurance

2014

13,83613

13,823

10,479770

9,709

2013

12,04525

12,020

17,7051,839

15,866


06Infrastruc-ture Credit Guarantee Services

The Korea Infrastructure Credit Guarantee Fund (KICGF) was created in accordance with the

Inducement of Private Capital to SOC Facilities Act enacted on August 3, 1994, to construct

infrastructure facilities and to contribute to the national economy by facilitating private

investments through credit guarantees.

The main businesses of KICGF include constructing and managing the fund, researching PPP

development plans, issuing letters of intent to guarantee, executing surety liabilities, and

exercising the rights of indemnity.

Infrastructure Credit Guarantee Structure & Role

Industrial competitivenessimprovement

Expand and improve the infrastructure facilities

＞＞

KICGFGuarantee

SupportFund Supply

Financial Institution etc.

(Bank etc.)

Promotion of welfare

Balanced national development

Concessionaire

KODIT facilitated Total of 8 projects with 12 cases worth about USD 1,819 million in 2014

to project operators that experienced difficulties in financing due to the recession of the

domestic construction industry.

Guarantee Approval

The capital funds for KICGF reached USD 588 million by the end of 2014, an increase of

USD 40 million compared to previous year. As of the end of year 2014, the government has

contributed USD 391 million, which have seen accumulated profits of USD 186 million.

* Applied IFRS from 2009

Capital Fund

Guarantee Approval & Outstanding Amount (Unit: USD million)

Guarantee Approval

Outstanding Approval

Outstanding Guarantee

2008 2009 2010 2011 2012 2013 2014

1,10

6

1,68

4

1,73

5

1,37

1

1,47

1

1,43

3

1,81

9932

1,511

1,988

2,41

0 2,80

9 3,05

1

3,12

6

4,14

3

4,39

6

5,40

8

6,16

5

6,98

9

7,71

6

7,41

1

* Approved Cases : Highways etc, 9 case (USD 1,538 million, Seoul Bukbu Highways etc.),

Railways 1 case(163 million, Yongin everline railways), Tunnel 1 case(USD 63 million, Mt.Chunma Tunnel ),

Recyling Facility 1 case(USD 54 million, Jeonju recycling energy)


07Startup Support Services

KODIT has been operating the “Comprehensive Support System for Startups” since March

2008. The system provides comprehensive startup-related services including consultation,

education, startup guarantees, and consulting to prospective entrepreneurs and firms recently

established.

Consolidated Support System for Startups

Startup Support Performance (Amount Unit : USD million)

“Comprehensive Support System for Startups” reduces the time and cost required to start

a business and provides customized startup assistance to firms according to their phases.

Moreover, it has facilitated new startups to raise the success rates through the One-Stop

Service that covers from consultation to finance support .

The startup guarantee has been operated as demand-oriented guarantee services that cover

from preparation phase to business growth phase so as to help promising startups which have

high-tech and creativity, but face difficulties to access finance.

Moreover, KODIT has been operating consulting services that emphasize management

to improve corporate values such as startup consulting and enhanced competitiveness

consulting with its staff and outside experts and has established the customer-oriented

corporate management assistance system through various means including corporate training

and e-management data.

＞＞Startup Support Program

Startup Success

New Startups Preliminary

ConsultationEntrepreneurial

TrainingStartup

GuaranteeManagement

Consulting

Startup Guarantees

Pre-entrepreneur

-

775

No.

-

52

Amt

2,7583,254

No.

807 1008

Amt

1,6631,994

No.

576 719

Amt

Hope Start Academy

Consulting

20132014

430 completion

383 completion

223253

1,6862,469

No.

791 939

Startup Growth stageEarly stage

Amt

08Internati-onal Affairs

By participating in various international conferences and forums, KODIT has been able to

understand the global economic flows and subsequent changes in the credit guarantee

schemes in other nations, while introducing the credit guarantee scheme of Korea to many

foreign visitors. Moreover, KODIT has strengthened global competitiveness by providing

advices to developing nations with its experiences and knowledge.

In 2014, KODIT participated in annual conferences hosted by the Asian Credit Supplementation

Institution Confederation (ACSIC) and European Association of Mutual Guarantee Societies

(AECM), Astana Economic Forum, and an Iberoamerican Forum and shared its experiences.

It also signed a memorandum of understanding (MOU) with Croatian and Malaysian public

financial institutions for SMEs. Through working-level council meetings with Japan, Taiwan,

Thailand and Mongolia, KODIT strengthened the cooperative relationships with related

overseas organizations.

A. Expanded Global Networks

KODIT actively participated in KSP, a government assistance program on sharing economic

development experiences with developing nations, since 2007; it has provided consulting

services on the introduction of the credit guarantee scheme and establishment of credit

guarantee schemes in Vietnam, Kazakhstan, Cambodia, and Ghana. In 2014, KODIT expanded

the partner countries to Indonesia and Myanmar.

Furthermore, KODIT diversified areas of the KSP from policy consulting to system consulting

which contributed to establishing credit guarantee evaluation system in Vietnam and

Kazakhstan

KODIT introduced the credit guarantee schemes of Korea and its roles and performance to a

total of 137 foreign delegates through 21 presentations.

B. Knowledge Sharing Program (KSP)

Country Time Details

Kazakhstan

Vietnam

Myanmar

Indonesia

Consulting the credit evaluation system to DAMU Fund

Consulting the credit evaluation system to VDM

Policy consultation to introduce credit guarantee scheme

Policy consultation to improve policy finance for SMEs

2014. 7. ~ 2015. 1.

2014. 9. ~ 2015. 4.

2014. 6. ~ 2015. 4.

2014 KSP Projects


09Major Events in 2014 KODIT

Month

January

Details

2nd

29th

Held a kick-off meeting for the year 2014

Amended 「Guarantee Work Process for Promising Startup Support」

February 26th Delegates from Gabon visited for training

March 7th

31st

Had an agreement ceremony for joint-agreement with Seoul

Amended 「Operational Standard of Credit Insurance Evaluation System」

April 1st

2nd

7th

16th

28th

30th

Delegates from Ethiopia visited for training

Provided financial consulting for private sector investment in Gyeongsangnamdo Province

(Co-managed by KODIT-Ministry of strategy and Finance)

Held the 1st “Hope Startup Academy”

MOU with KRX for IPO support

Delegates from Middle Eastern country visited KODIT to benchmark SME promotion

Chairman from MCGF of Mongolia visited KODIT

May 7th

12th

15th

20th

Practiced community services by board members and KODIT labor union

Held the 2nd “Hope Startup Academy”

Held the “Startup Concert” for creative enterprises

Held the “Hope Job Audition” at recommended best SMEs by KODIT

June 5th

17th

Practiced “Sharing Happy Dosirak” for the 38th Birthday

Delegates from Malaysia SME Development Bank visited KODIT

July 2nd

10th

16th

25th

Practiced ‘Sharing a Bike“ as a community service activity

Awarded the grand prize in “2014 Korea Service Award” for the

finance service for 2 consecutive years

MOU with Shinhan Bank for enhancing a best company which creates high quality job

MOU with MOEL and KEIS for vitalizing creative economy, creating job

August 12th

14th

27th

MOU with Converged Finance Support Council

MOU with Technical Commercialization Acceleration

BKPM & IIPC from Indonesia visited KODIT

September 24th

25th

29th

30th

Managed the 1st SME·Venture Financial Support Fair

Held an agreement ceremony of tax management prevention and audit for an advanced audit system

MOU with KJ Bank for enhancing relationship bankingHeld the 3rd “Hope Startup Academy”

MOU with related organization for converged export supports on

domestic·export purpose early-stage enterprises

December 22nd Relocation of KODIT Headquarter to Daegu

October 20th

22nd

24th

Held the 4st “Hope Startup Academy”

Inspected by the government audit

Provided financial consulting for private sector investment in Gyeongsangnamdo

Province by KODIT-Ministry of Strate and Finance co-managemen

November 7th

14th

17th

19th

20th

21st

24th

27th

28th

Certified as 2014 Best Human Resources Development Institution

Delegates from Malawi visited for training

Delegates from Qatar visited KODIT

KSP training session for Indonesia

Delegates from the Chinese MOF PPP visited KODIT

MOU with ACSIC Annual Meeting & Malaysia SME Development Bank

Held a ceremony for 2014 Shinbo Star Enterprise Conferment

Managed the “Creative Korea 2014”

MOU with HAMAG of Croatia

KSP Project

Gobal Conference

Relocation to Daegu

37CONTENTS

FINANCIALS & GOVERNANCE

384 14244

Financial Statement

Governance

Board of Directors

Organization Charts

01.

02.

03.

04.

FINANCIALS & GOVERNANCE 39FINANCIALS & GOVERNANCE 38

01Financial Statement

Credit Guarantee Fund(Unit : USD million)

Credit Insurance (Unit : USD million)

Current Assets

Cash and Deposits

Marketable Securities

Subrogation Rights

Others

Fixed Assets

Long-term Deposits

Long-term Securities

Investments

Tangible Assets

Others

Total Assets

Current Liabilities

Received Deposits

Deferred Revenue

Others

Fixed Liabilities

Reserves for Guarantee

Allowance for Retirement

Others

Total Liabilities

Total Capital Funds

Total Liabilities & Capital Funds

4,812

1,898

1,603

856

455

2,369

1,191

702

14

342

119

7,181

2013

4,704

1,780

1,932

860

132

2,692

925

825

425

392

126

7,396

2014

327

4

296

27

1,882

1,747

134

0

2,209

5,187

7,396

330

4

302

23

1,429

1,309

119

0

1,758

5,423

7,181

Current Liabilities

Reserves for Insurance Contract

Others

Total Liabilities

Total Capital Funds


119

107

13

119

302

421

96

95

1

96

242

339

Current Assets

Cash and Deposits

Others

Fixed Assets

Long-term Deposits

Securities Held to Maturity

Others

Total Assets

264

254

10

75

42

1

33

339

2013

218

206

12

203

127

1

75

421

2014

* Accounting standards for insurance business has been changed in 2012

Infrastructure Credit Guarantee Fund(Unit : USD million)

Current Assets

Cash and Deposits

Marketable Securities

Others

Fixed Assets

Long-term Deposits

Long-term Securities

Others

Total Assets

376

210

159

8

192

115

78

0

568

2013

430

223

199

8

180

80

101

0

610

2014

Current Liabilities

Received Deposits

Deferred Corporate Tax

Others

Fixed Liabilities

Reserves for Subrogation

Others

Total Liabilities

Total Capital Funds


7

2

4

0

14

14

20

548

568

7

3

4

0

16

16

22

588

610


02Governance

The Board of Policy decides on KODIT’s major policies through enacting essential regulations.

Matters for deliberation and decision include revisions to articles of association and operational

guidelines, budget compilation, and establishment of operational plans. The board consists of

12 members including the Chairman & CEO of KODIT; governmental officials from the Financial

Services Commission (FSC), the Ministry of Strategy and Finance (MOSF), and the Small and

Medium Business Administration (SMBA); executives from the Bank of Korea, the Industrial

Bank of Korea, and other financial institutions; and representatives from the Federation of

Enterprises. The board is chaired by the Chairman & CEO of KODIT. The board has regular

meetings held in February and November, and extraordinary meeting in case of necessity.

Board of Policy

The Board of Directors deliberates on significant issues related to the operation of KODIT

following the articles of association and operational guidelines. The Board of Directors resolve

major issues concerning credit guarantee, guaranteed obligation, asset management, and

investment. Members of the board include the Chairman & CEO, deputy president, senior

executive directors, and senior non-executive directors. The board is chaired by the Chairman

& CEO, who is appointed by the president of Korea and has the authority to appoint other

executive directors. The CAE(Chief Audit Executive) nominated by the president of Korea

attends board meetings. The Board of Directors meet once a week on a regular basis.

Board of Directors

03Board of Directors


G E D F

C A B

Seoh, Geun WooPresident & CEOChairman of the Board of Directors

Cho, In KangChief Audit Executive

A

B

Han, Chong KwanDeputy PresidentMember of the Board of Directors

C

Lee, Bo HyunSenior Executive Director Head of Management Planning DivisionMember of the Board of Directors

D

Park, Jae JoonSenior Executive DirectorHead of Management Support DivisionMember of the Board of Directors

E

Hwang, Byung HongSenior Executive DirectorHead of Credit Business DivisionMember of the Board of Directors

F

Kwon, Jang SubSenior Executive DirectorHead of Capital Market DivisionMember of the Board of Directors

G


04Organization Chart

The Board ofPolicy

The Board ofDirectors

President & CEOChairman of the Board of Directors

Deputy PresidentMember of the Board of Directors

• Risk Management Office• Public Relations Office

• Secretary Office

Chief Audit Executive

• Auditing & Examination Office

KODIT’s 106 Branches

Seoul SeobuBusiness Headquarters

Seoul Dongbu Business Headquarters

Mapo Branch

Yeongdeungpo Branch

Jeju Branch

Gwanghwamun Branch

Chuncheon Branch

Dongdaemun Branch

Gangneung Branch

Gwangjin Branch

IncheonBusiness Headquarters

Incheon Branch

Banwol Branch

Incheonjungang Branch

Bupyeong Branch

Ansan Branch

Namdong Branch

Bucheon Branch

Sihwa Branch

Incheonseo Branch

Siheung Branch

Songdokukje

Branch

Gyeonggi Business Headquarters

Suwon Branch

Anyang Branch

Seongnam Branch

Pyeongtaek Branch

Icheon Branch

Osan Branch

Gunpo Branch

Yongin Branch

Hwaseong Branch

Gyeonggigwangju

Branch

Hwaseongseo

Branch

Gangnam Branch

Samseong Branch

Gangdong Branch

Wonju Branch

Namyangju Branch

Teheranno Branch

Bangbae Branch

Hanam Branch

Sokcho Branch

Songpa Branch

Yangjae Branch

Donghae Branch

Gurodigital Branch

Namdaemun Branch

Gasandigital Branchl

Gangbuk Branch

Gangseo Branch

Uijeongbu Branch

Gimpo Branch

Goyang Branch

Pocheon Branch

Seogwipo Branch

Paju Branch

Management Planning Division

• Planning & Coordination

• Performance Management Department

• Strategic Research Department

• Specialized Business Headquarter

• 8 Local Business Headquarters

• Debt Collection Unit

• Rechallenge Support Unit

Capital Market Division

• Capital Market Department

• Social Overhead Capital Guarantee Department

• Enterprise Support Department

• Rechallenge Support Department

Management Support Division

• Human Resources Department

• Operation Support Department

• IT Strategy Department

Credit Business Division

• Credit Guarantee Department

• Guarantee Evaluation Department

• Credit Insurance Department

Security Control Officer 106 Business BranchesBusiness Headquarters

FINANCIALS & GOVERNANCE 46

KODIT’s 106 Branches

Daegu & Gyeongbuk Business Headquarters

Daegu Branch

Daeguseo Branch

Pohang Branch

Gumi Branch

Daeguhyeoksin

Branch

Daegubuk Branch

Yeongju Branch

Seongseo Branch

Gyeongsan Branch

Gyeongju Branch

Andong Branch

Chilgok Branch

Dalseong Branch

Busan & GyeongnamBusiness Headquarters

Busan Branch

Changwon Branch

Jinju Branch

Sasang Branch

Ulsan Branch

Dongnae Branch

Masan Branch

Gimhae Branch

Tongyeong Branch

Saha Branch

Yangsan Branch

Busanjungang

Branch

Noksan Branch

Ulsanbuk Branch

Gimhaebuk

Branch

Chungcheong Business Headquarters

Daejeon Branch

Cheongju Branch

Cheonan Branch

Chungju Branch

Seosan Branch

Daejeonjungang

Branch

Jeungpyeong

Branch

Daedeok Branch

Asan Branch

Jecheon Branch

Boryeong Branch

Cheongjuseo

Branch

Dangjin Branch

HonamBusiness Headquarters

Gwangju Branch

Jeonju Branch

Gunsan Branch

Yeosu Branch

Mokpo Branch

Iksan Branch

Gwangjujungang

Branch

Suncheon Branch

Gwangsan Branch

Gwangjucheomdan

Branch

Jeongeup Branch

Jeonjuseo Branch

7, Cheomdan-ro, Dong-gu, Daegu, Korea T. +82-1588-6565 www.kodit.co.kr

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