As of June of this year, 73 percent of corporate loans were made to small- and mid-sized businesses, a 10 percentage point drop from the end of 2009.
The financial sector, specifically those employed by financial institutions, are often reluctant to take a risk with start-ups and SMEs, as they face sanctions if the borrower becomes insolvent.
Reporting to President Park Geun-hye at her economic advisers' meeting Tuesday, the state-run Financial Services Commission said it would lift more than 90 percent of such sanctions.
That means in the case of insolvency, employees will not be deprived of a promotion or bonuses so long as there are no procedural failures.
The financial regulator will instead strengthen sanctions on the institutions.
To further encourage financial support for the president's envisioned creative economy, which aims to converge ICT, culture and other areas, the FSC talked about offering incentives to banks that support innovation and technology-based firms.
The government also plans to set up a technology-valued investment fund totaling 295 million U.S. dollars that will be used as venture capital, and more than double another fund that buys a tech firm's intellectual property or shares to guarantee a return on its investments.
President Park urged authorities to ensure enough low-interest loans are made available for businesses whose creativity and innovative technology are appreciated.
Many financial insiders welcomed the government's sanction reforms, but there were some concerned about how assessing the banks' innovation for incentives could limit their autonomy and push them toward insolvency.
Choi You-sun, Arirang News.