Innovative financing

At stake is how to ensure its implementation at bank windows

President Moon Jaein announced his administration's plan on Thursday to induce the overhaul of lending practices. Attending a meeting to "declare a vision for innovative financing," President Moon said the government would introduce a comprehensive collateral system, which bundles up different assets, such as property rights, movables and bonds, into a security package to be used for borrowing from financial institutions.

The government plan also calls for allowing smaller companies without real estate to borrow from banks if they possess technology and growth potential. In addition, working out differentiated criteria to allow biotech firms and other innovation-oriented businesses make an initial public offering on the stock market is under consideration.

In short, the government will help small businesses and venture firms without real estate to borrow money from financial services firms and raise funds through the stock exchange if they have a technological edge, business ideas and good prospects. We welcome the government's plan. If the administration can make funds flow to small but innovative businesses, it is sure to stimulate entrepreneurs' creativity and spirit of innovation.

The problem is how to ensure the plan's implementation. Most of the previous administrations also stressed the importance of easy financing. Regrettably, policymakers' ideas failed to be turned into actions on the front lines of lending institutions. When lending without collateral leads to bad debts, bankers are held accountable, and lenders suffer from the poor performance.

All of this shows why the Moon administration needs to work out detailed action programs lest its lending reforms end up as mere slogans. It should study why past plans did not work and which areas need supplementing. Based on such research, officials should create a solid infrastructure along with concrete and detailed reinforcement plans.

We also regard as positive the decision to lower the securities transaction tax, from 0.3 percent to 0.25 percent for the KOSPI and from 0.3 percent to 0.1 percent for the KONEX markets.

The gradual reduction of the stock transfer tax is going in the right direction. Still, the government ought to come up with measures to make up for revenue losses resulting from the lower tax rates.