The Financial Supervisory Service (FSS) is conducting its first-ever review of how commercial banks operate social solidarity finance programs.
According to financial industry sources Wednesday, the FSS has been collecting related materials from commercial banks this month to examine the current state of social solidarity finance operations. “The best practice guidelines for activating social finance, introduced in 2018, have not been fully embedded at some banks,” a regulatory official said. “We will check whether the guidelines are reflected in internal rules and encourage banks to expand social solidarity finance.” This marks the first time financial authorities have inspected the actual state of social solidarity finance.
Social solidarity finance refers to providing funds to cooperatives, social enterprises and social ventures to support the realization of public values beyond mere profit generation. Eight years ago, the banking sector voluntarily adopted the best practice guidelines for activating social finance to ensure smooth fund flows to social economy enterprises with low credit ratings. The guidelines include classification standards for social finance, credit management and review systems, and the composition of operating committees. Through this review, the FSS plans to verify whether these institutional mechanisms have been properly established in the field.
The move aligns with the broader push to strengthen inclusive finance. Financial authorities view social solidarity finance as moving in the same direction as inclusive finance, in that it departs from profit-oriented business practices and channels funds to areas insufficiently supported by the government and the market. At a Social Solidarity Finance Council meeting on the 8th, Financial Services Commission (FSC) Secretary General Shin Jin-chang said, “Social solidarity finance, which pursues both profit and value, can be a solution closer to the essence of finance,” calling for active participation from the financial industry. The initiative also appears to be in step with moves by the ruling party and government to enact a Framework Act on the Social Solidarity Economy.
The financial sector is also showing willingness to expand social solidarity finance. Commercial banks have announced plans to supply a total of 4.25 trillion won to social solidarity economy organizations from this year through 2028, an 18% increase compared with the previous three years. “Some organizations, such as cooperatives, face limitations in establishing guarantee structures like ordinary corporations,” an official at a commercial bank said. “Still, we plan to actively expand funding support for social economy enterprises.”