IBK’s Value Finance supports SMEs, innovation and balanced growth

The Industrial Bank of Korea (IBK) was established in 1961 with a clear mandate from the South Korean government: to support small and medium-sized enterprises (SMEs), through a network of 629 domestic branches and 60 global branches spread across 13 countries. SMEs form the backbone of the South Korean economy, representing 99% of businesses and employing 88% of the workforce. Their role in fostering economic growth, innovation, and employment is critical.

Unlike commercial banks, IBK operates with a unique dual mandate—while it must remain profitable to ensure its sustainability, it is also tasked with promoting public value through the support of SMEs. These companies often face difficulties in securing financing from traditional commercial banks, particularly during the early stages of growth or in times of economic uncertainty. As such, IBK plays an important role in maintaining South Korea’s economic resilience.

Under the leadership of Kim Sung-Tae, who took on the role of Chairman and CEO in 2023, IBK has refined its Value Finance strategy. This approach combines the pursuit of profitability with the mission of driving societal growth by supporting SME finance, digital transformation and balanced growth. IBK holds 23% of the SME loan market and has accumulated KRW 500 trillion (about $373 billion) in assets, positioning itself among the top 100 banks globally.

Leadership and vision: Embracing Value Finance for balanced growth

Kim, upon assuming the Chairman and CEO role in 2023, introduced Value Finance as the core of IBK’s operational strategy. This philosophy was built around the concept of enhancing customer value while simultaneously contributing to societal growth. he explained, “Value Finance seeks to ensure that we, as a bank, are not just serving the interests of our shareholders but also benefiting the broader economy and society.”

With over 33 years of experience at IBK, Kim understood the importance of balancing public value and profitability. One of his standout achievements has been maintaining IBK’s impressive growth trajectory. By 2024, IBK had amassed KRW 500 trillion ($373 billion) in assets, placing it among the largest banks globally. Remarkably, IBK has achieved this growth organically—without relying on mergers or acquisitions, a common strategy for many international banks seeking rapid expansion.

Kim’s leadership also emphasized IBK’s role as a policy bank, supporting national economic development. Unlike fully private banks, IBK has a public mission: ensuring that its growth translates into benefits for South Korea’s economy, particularly through its work with SMEs.

Supporting SMEs: The backbone of South Korea’s economy

SMEs play a crucial role in the South Korean economy. They drive innovation, employment, and economic diversification, contributing significantly to the country’s GDP. However, SMEs often face challenges in accessing financing, especially during periods of economic instability. Since its founding, IBK has been dedicated to supporting these businesses, providing the financial as well as non-financial services necessary to help them grow and thrive.

IBK Changgong startup incubation programme

One of IBK’s most notable initiatives under Kim’s leadership is the IBK Changgong startup incubation programme. Launched to support innovative startups and small businesses, the programme offers financial and non-financial resources. What sets IBK Changgong apart is that it offers all its services free of charge. By 2024, IBK Changgong had provided KRW 4.58 trillion ($3.4billion) in loans and KRW 15.57 trillion ($11.5 billion) in investments. But IBK Changgong goes beyond just providing funding—it also offers mentorship, strategic consulting, and market access to startups, giving them the tools they need to succeed in highly competitive industries. To date, 887 companies have been incubated by the programme.

SME M&A market creator

Recognising the growing importance of mergers and acquisitions (M&A) in the SME sector, IBK launched the KRW 4 trillion ($3 billion) SME M&A Finance Support Package. Unlike a typical active M&A approach, Kim initiated this programme to address a specific challenge faced by first generation business owners in South Korea. Many of these founders are struggling to pass their businesses on to the second generation, leading to concerns about the future sustainability of these companies. To help facilitate this generational transition, IBK offers financial support and advisory services, ensuring that these businesses can successfully continue under new leadership without disruption.

IBK’s M&A support package not only provides the necessary capital for acquisitions but also includes advisory services to guide SMEs through the complex process of identifying acquisition targets and executing successful deals. By offering both financial and strategic support, IBK has positioned itself as the partner of choice for SMEs looking to continue to operate through M&A.

Crisis support for SMEs

Beyond its support for SMEs during periods of growth, IBK has also played a critical role in providing financial assistance during times of crisis. Amid the COVID-19 endemic, when many small businesses faced the unprecedented triple burden of high inflation, high exchange rates, and high interest rates, IBK rolled out interest reduction programmes and provided KRW 65 trillion ($48.5 billion) in liquidity support to struggling SMEs.

One notable example of IBK’s crisis intervention was its response to the collapse of major e-commerce platforms like Tmon and WeMakePrice, which left many small vendors on the brink of bankruptcy. IBK stepped in as the sole provider of crisis support. By offering emergency financial support, IBK prevented widespread bankruptcies and helped these businesses recover from the economic fallout. This swift and decisive action underscored IBK’s role as a financial lifeline for South Korean SMEs.

National and economic contribution: Supporting policy finance and strategic sectors

In addition to supporting SMEs, IBK has played a central role in policy finance, working closely with the South Korean government to promote economic development in key sectors. Policy finance refers to financial support provided to industries or sectors that are considered vital to a country’s long-term economic health. In South Korea, IBK has been tasked with ensuring that SMEs in the manufacturing, wholesale, retail, and service sectors have access to the capital they need to innovate and grow.

IBK’s role as a policy bank goes beyond just supporting SMEs. It plays a central role in South Korea’s policy finance system, which is designed to allocate financial resources to industries that are vital for the country’s economic development. Unlike fully commercial banks, IBK is tasked with ensuring that critical sectors like advanced manufacturing and technology have access to financing, even during challenging times.

By partnering with public institutions like KODIT, IBK can mitigate risk and provide more favourable terms than commercial lenders, such as longer repayment periods and lower interest rates. This collaboration ensures that sectors vital to South Korea’s strategic growth—such as renewable energy, smart manufacturing, and AI-driven industries—continue to thrive, even in the face of global economic uncertainties.

IBK has also actively expanded its support for SMEs by launching global acceleration programmes under the IBK Changgong initiative. These programmes are designed to help South Korean startups and SMEs enter international markets, particularly in Europe and Silicon Valley. For instance, the IBK Changgong Global (Europe) Acceleration programme collaborates with local partners in Germany, such as Saarland and the Korea Institute of Science and Technology (KIST), to help domestic startups establish a foothold in Europe.

Additionally, IBK has developed the IBK Europe International Cooperation Belt, a strategic initiative aimed at supporting South Korean businesses in expanding into European markets. This includes partnerships with local public institutions, such as Finnvera in Finland and Bpifrance in France, to provide export financing and ensure smooth market entry.

IBK Box and IBK Loan Pathway Box

As a SME-focused public financial institution, IBK launched the IBK Box and IBK Loan Pathway Box to further its mission of empowering SMEs. These programmes simplify financial management and provide streamlined access to loans, helping SMEs embrace digital transformation and scale efficiently. The IBK Box platform allows businesses to manage their financial needs—such as applying for loans, accessing advisory services, networking and managing accounts—all in one place. This system helps streamline the banking experience for SMEs, ensuring that they can handle their financial needs quickly and efficiently.

Additionally, the IBK Loan Pathway Box, which is a module within the of IBK Box platform, was developed to simplify the loan application process. SMEs can apply for loans through this web-based interface, which eliminates the need for in-person meetings and allows businesses to manage the entire loan process digitally. These innovations are part of IBK’s ongoing commitment to supporting SMEs through digital transformation, ensuring that even small businesses can access necessary funding with minimal hassle.

Venture capital and early-stage growth

IBK plays a vital role in supporting startups and early-stage companies, particularly in high-growth sectors. As part of its commitment to nurturing innovation, IBK became the first state-run bank in Korea to establish a venture investment subsidiary. The subsidiary, IBK Venture Investment, was created to provide strategic guidance and financial backing to startups, focusing on companies with high growth potential.

As part of its future objective, IBK has committed to creating KRW 500 billion ($373 million) in new venture fund, with 50% dedicated to early-growth companies, especially those in high-growth industries, particularly those involved in technology and biotech. These sectors are seen as critical to maintaining South Korea’s competitive edge in the global economy, and IBK has positioned itself as a key player in providing the capital these companies need to scale.

IBK’s role in venture capital goes beyond simple financial backing—it also provides strategic guidance, helping companies navigate the complex challenges of scaling up, entering new markets, and securing partnerships with global players.

ESG and inclusive finance: Leading with purpose

Under Kim’s leadership, IBK has placed a strong emphasis on environmental, social, and governance (ESG) practices, recognizing the growing importance of sustainability and inclusivity in the banking sector. One of IBK’s flagship ESG initiatives has been its focus on inclusive finance, designed to support underrepresented groups such as female entrepreneurs, multicultural families, and foreign workers.

Gender equality bond

In 2023, IBK issued a $600 million gender equality bond, aimed at supporting women-led businesses in South Korea. This bond is part of IBK’s broader commitment to promoting gender equity and providing female entrepreneurs with the capital they need to succeed in industries where they have historically been underrepresented. Kim said, “The gender equality bond is not just a financial product—it’s a statement of our commitment to levelling the playing field for women in business.”

The bond’s impact has already been felt, with numerous women-led businesses receiving the funding they need to grow and thrive. By promoting gender equity, IBK is contributing to the diversification of South Korea’s entrepreneurial landscape.

Green finance and sustainability

IBK’s commitment to green finance has also been a key pillar of its ESG strategy. The bank has been providing loans to companies involved in renewable energy, energy efficiency, and eco-friendly technologies. These loans are designed to support businesses that are working to reduce South Korea’s carbon footprint and contribute to global sustainability goals.

The gender equality bond has far-reaching implications for South Korea’s economy, particularly in terms of addressing the country’s historically low female workforce participation rate. By specifically directing funds to women-led businesses, the bond helps break down the structural barriers that have traditionally limited access to capital for female entrepreneurs.

Studies have shown that improving gender diversity in the workforce can boost national gross domestic product (GDP), and IBK’s initiative aligns with the government’s goals of increasing women’s participation in the economy. Furthermore, many of the businesses funded by the bond are involved in social enterprises and community-driven initiatives, creating a ripple effect that benefits not only the economy but also South Korean society as a whole.

IBK’s commitment to sustainability aligns with South Korea’s Net Zero 2050 initiative, which aims for carbon neutrality by 2050. As part of this initiative, IBK has been actively providing financing for projects focused on renewable energy, energy efficiency, and eco-friendly technologies. By offering preferential loan terms to assist SMEs with their green transition, IBK plays a crucial role in transitioning the South Korean economy towards a more sustainable energy future.

In line with the government’s Net Zero 2050 initiative, IBK also fosters job creation and innovation in green industries. The bank supports companies that are reducing South Korea’s carbon footprint, helping the country meet its global environmental commitments. This aligns with IBK’s broader ESG strategy, which prioritises the environmental impact of its financial services and products, supporting businesses that adopt more sustainable practices.

ESG self-diagnosis tools

In addition to providing funding, IBK has introduced ESG self-diagnosis tools for SMEs. These tools allow businesses to assess their environmental and social impact, identify areas for improvement, and implement more sustainable practices. Kim has been a strong advocate for these tools, stating that they help SMEs align with global sustainability standards while also promoting long-term business success.

A balanced strategy for sustainable growth

Under Kim’s leadership, IBK has successfully balanced its mission of profitability with its commitment to public value. The bank’s Value Finance strategy has enabled it to become a leader in SME finance, digital innovation, and ESG. By supporting SMEs through initiatives like the IBK Changgong startup programme and the SME M&A Finance Support Package, IBK has strengthened its role as a key driver of South Korea’s economic growth.

IBK’s leadership in sustainable finance and gender equality initiatives underscores its commitment to building a more equitable and sustainable economy. However, as Kim has acknowledged, the banking sector is evolving rapidly, and IBK must continue to innovate, particularly in the areas of digital transformation and global expansion.

Looking forward, IBK’s success will depend on its ability to adapt to new market conditions, embrace technological advances, and deepen its commitment to sustainability. Kim’s leadership has provided IBK with a solid foundation, but continued innovation and a focus on public value will be critical to ensuring the bank’s long-term success in an increasingly interconnected and competitive global market.