[Editorial] To Promote Productive Finance, Companies’ Cash Flow Bottlenecks Must Be Unclogged

The government and financial authorities are putting "productive finance" forward as a key national policy task. But in practice, companies say they do not feel much improvement in access to funding. A survey on financing conditions conducted by the Korea Chamber of Commerce and Industry (KCCI) among 204 non-financial companies shows that corporate liquidity stress is severe.
In the survey, companies cited borrowing from commercial banks (43.6%) as the financing channel that became the most difficult over the past year. They pointed to the burden of interest payments caused by high rates as the biggest obstacle. Even policy finance (11.8%) and equity investment attraction (2.9%) were said to have become harder to secure. From bank loans to corporate bond issuance, none of the major funding channels appears to have improved. The gap between the government's push to expand productive finance and the response from the field is clearly wide.
What stands out is that bank lending to companies remains far from smooth. That suggests not only that banks maintain overly strict lending standards for companies, but also that they pass on too much of the interest burden. This is an area that needs improvement to ease corporate difficulties. Measures such as easing the risk weights on corporate loans should be considered.
If risk weights are lowered, the capital burden banks must hold will also fall, expanding their capacity to lend to companies. Such policy adjustments are exactly the kind of measures the government says it wants to use to expand productive finance. If banks simply pile up money without channeling it into the productive sector, how can that be called productive finance?
Corporate bond issuance (19.6%) and stock issuance (14.2%) were also cited as financing channels that have become more difficult, according to the report. That is because issuance costs have risen and new share offerings face practical constraints. The harder it becomes to issue corporate bonds, which account for a large share of corporate investment, the more the funding needed for management dries up.
More worrying is the finding that the benefits of being listed are not as strong as expected. The KCCI survey was conducted when the KOSPI (Korea Composite Stock Price Index) was hitting record highs. Even so, only 31.4% of respondents said the stock market had a positive effect on management activities, while more than half said it had little or no impact.
It is also notable that unlisted companies remain reluctant to pursue an Initial public offering (IPO). More respondents said they were still cautious about an IPO (56.9%) than said they were considering one positively. The reason is the heavy burden of disclosure obligations and regulations after listing. Some also said meeting the strict listing requirements was itself a burden. The authorities should review whether any parts of the system are excessive or incomplete.
The success or failure of policies to promote productive finance depends on how much they reflect voices from the field. No matter how strongly the government urges the financial sector to expand productive finance, it will remain desk-bound theory if companies still cannot access the funds they need in practice.
The government should conduct a full review of the many ways companies raise funds. The essence of productive finance is to identify where cash flow bottlenecks are occurring in corporate management and devise support measures that allow companies to secure funding stably.