President Moon Jae-in called Thursday on local lenders to change their risk-free lending system to increase investment in new, innovative companies based on their growth potential.
"In the fourth industrial revolution, ideas represent competitiveness. We must be allowed to embark on a challenge with only our ideas," the president said in a meeting with some 110 officials from local companies and lenders, including venture capitalists.
"Finance must recognize the value of ideas. Finance must actively support and lead innovation," the president added.
Thursday's meeting follows a series of recent events attended by the president where he strongly called for efforts to promote new businesses as a way of revitalizing the economy and creating more jobs.
Moon's focus on the economy follows the apparent failure of his trademark job and income-led growth strategies, with the country's jobless rate reaching a 17-year high of 3.8 percent last year.
Moon earlier noted the conditions in the local job market may be improving, adding the country added 263,000 new jobs from a year earlier last month, the largest increase in over a year. He, however, has said the economy may still need an extra push.
The president insisted the financial sector may be holding the first key to more jobs and an economic recovery.
"To create a second venture boom, we must have a financial system that promotes innovation and new challenges, in addition to efforts by businesses and the government," he said during the meeting held at the Seoul headquarters of the state-run Industrial Bank of Korea.
"Already, many countries in the world are moving to promote innovative venture firms through innovative financing. Global leading financial firms are providing funds to innovative companies without any collateral based on their value and future growth potential," he added.
"We, on the other hand, continue to prevent the launch of new innovative companies because of our collateral-based and profit-first lending practices," Moon said.
Moon said the country will make the needed changes.
"First, it will completely innovate the bank lending system," the president said, adding the move will help funnel some 100 trillion won (US$88.8 billion) in fresh funds to small- and medium-sized companies over the next three years.
He also promised 12.5 trillion won over the next three years in policy funds for SMEs that he said will lead to some 40,000 new jobs.
The president said the government will also change the way it evaluates lenders.
"There can be failures when pushing for innovations and financial institutes may post losses. The government will change its financial regulations to become more innovation-friendly. It will actively exempt financial companies from any responsibilities over a loss unless the loss is caused deliberately or by a major mistake," he said. (Yonhap)