Escolar Documentos
Profissional Documentos
Cultura Documentos
Financing
through Capital Market
Jae Ha PARK
Deputy Dean
Asian Development Bank Institute
Financing SMEs: Sharing Ideas for Effective Policies
Capacity Building and Training Workshop
Jointly organized by ADB Institute and Bank Indonesia
Jakarta, Indonesia, 15-16 October 2014
The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank
Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the
data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB
official terms.
* Note: Calculated based on data of the ADB Asia SME Finance Monitor 2013 and
the OECD Scoreboard 2013.
banks, 71.9
P-CBO pools bonds with different levels of risk; and with sufficient
number of firms, the overall risk as well as transaction costs
decrease.
Credit enhancement further reduces the credit risk of CBO.
Basic Structure of P-CBO Issuance
10
With credit guarantees by KODIT or KIBO, the percentage of the senior tranche in the total PCBO deal went up to 93-97%
11
12
Angel
Investment
Individuals
Angel Fund
Investors
Banks
KCGF
PEF
(GP)
(LP)
Investment
Fund
SME
(LP)
(LP)
Other Investors
Government including
Korea FoF
Pension Fund
Financial Institutions
13
14
15
16
Since the govt and experienced manager are fundraiser and fund manager, respectively, the
fund operates more efficiently and for public interests.
The fund may protect the venture capital market in recession.
Structure of Fund of Funds
Investor 1
Investor 2
Investor N
Fund of Funds
Sub-Fund 1
Venture
Company
Venture
Company
Sub-Fund 2
Venture
Company
Venture
Company
Sub-Fund N
Venture
Company
Venture
Company
17
Since KFoF selects sub-funds with good track records, sub-funds have incentives to
manage their assets efficiently.
KFoF is expected to raise 1 trillion won over five years, and creates new VC ranging from
500 to 600 billion won each year.
The scheme is more efficient than when the government directly selects venture
companies and makes investment decisions.
Government SME Financing through Capital Market
Government
Direct investment
decision making
Lack of specialty, moral
hazard, corruption
Finance/Credit
Guarantee
Government
SME
Investment
decision making
and management
follow up
Capital
Market
SME
18
19
Policy Recommendations
Building a credible SME information sharing system
For corporate bond issuance, pooling a group of SMEs may provide a plausible solution to the
inherently higher credit risk and transaction costs associated with SMEs.
If a deal is structured with number of tranches, the base of potential investors will be broadened with
different levels of risk preferences.
The liquidation of bank loan assets in the market via CLO will provide another indirect way of
tapping into the debt capital market.
20
Policy Recommendations
Fostering venture capital market
For the equity market, fostering venture capital and providing an incentive compatible
environment throughout the whole activity cycle of venture capitalists are the first
priority.
Search stage: credible information sharing system and networks of technology and
business assessment industries are crucial.
Raising value of portfolio firm: venture capitalist can play an active role in raising
corporate value through cooperation with the management of the company.
Exit stage: there should be a viable number of exit strategies for the venture
capitalists.
Thank you
22