LG Electronics said Sunday that it would set up a 6 billion won ($5.6 million) fund with its affiliate LG Chem to invest in social enterprises over the next three years.

The South Korean tech giant said the LG Social Fund would financially support companies such as social venture firms and village enterprises seeking to improve the country’s socioeconomic conditions by creating innovative solutions.

The LG companies said they hoped LG-backed social enterprises would not only increase productivity and jobs but also improve education and welfare.

“We plan to actively conduct this social activity to contribute to developing an ecosystem for social enterprises,” said Lee Choong-hak, chief of LG Electronics’ management support division.

LG will especially focus on discovering and investing in social companies with high business growth potential in improving the environment, an LG Electronics spokesperson noted.

Candidates can submit their applications via the Social Solidarity Bank, a local microcredit institution, by Nov. 6.

The selection process will be finalized on Dec. 10 after a thorough screening by government officials, academics and social companies.

The selected firms will be able to get funds or interest-free loans.

Companies that are less than 3 years old and have less than 400 million in annual sales will be eligible to receive up to 50 million won.

In addition, companies that have been established for more than three years or have annual sales of more than 400 million won will be offered up to 100 million won in interest-free loans.

LG Electronics said it would further help the selected companies by providing diverse training programs such as monthly seminars and workshops for knowledge sharing and social networking.

They will also be provided with consulting services, management classes and mentoring programs.

The nation’s conglomerates have been increasing their social contributions over the years, with the top five conglomerates ― Samsung, Hyundai, LG, SK and Lotte ― donating 92 billion won, or 30 percent of the total donation made to the Community Chest of Korea last year.

“Companies need to be more socially responsible and create higher value for society as part of their efforts to overcome growing business uncertainty,” said Lee Choon-sun, an executive at the Korea Productivity Center.

Over the past three years, LG Electronics and LG Chem have spent 6 billion won to support social enterprises that had sound business models but lacked capital or management expertise.

By Shin Ji-hye (shinjh@heraldcorp.com)