The monetary policy board of the Bank of Korea said 3.6 trillion won will be provided to small and medium enterprises that are seeking to find new growth drivers and contribute to job creation.
The decision comes as Asia's fourth-largest economy has been struggling to prop up growth and create more jobs for people, especially young people.
The unemployment rate for young people, aged between 15 and 29, was 9.3 percent in July, much higher than the overall jobless rate of 3.5 percent, according to government data.
Under the measure, commercial banks will move to provide loans to eligible SMEs first before the BOK provides the same amount of loans to commercial banks.
The loans carry very favorable annual interest rates ranging from 0.5 percent to 0.75 percent.
Separately, the BOK said an additional 1 trillion won has been set aside for SMEs that suffer setbacks in the process of undertaking corporate restructuring.
The BOK said it has decided to maintain the ceiling on loans extended to smaller firms through commercial lenders to 25 trillion won. (Yonhap)