First use of on-lending mechanism through overseas financial institution

Framework with Kazakhstan Development Bank covers up to 200 million euros

Korea Trade Insurance Corporation President Jang Young-jin (right) poses with Kazakhstan Development Bank President Marat Yelibayev (left) after signing a joint declaration at the Four Seasons Hotel in Jongno-gu, Seoul, on Tuesday. [Korea Trade Insurance Corporation]
Korea Trade Insurance Corporation President Jang Young-jin (right) poses with Kazakhstan Development Bank President Marat Yelibayev (left) after signing a joint declaration at the Four Seasons Hotel in Jongno-gu, Seoul, on Tuesday. [Korea Trade Insurance Corporation]

The Korea Trade Insurance Corporation will channel 75 billion won ($55.4 million) to a Kazakhstani state-run bank to help South Korean small and midsize companies secure financing for local projects.

K-SURE announced Thursday that it had extended 48 million euros in financing to the Development Bank of Kazakhstan, or DBK.

The arrangement marks the first time K-SURE has used an "on-lending" structure, in which it provides funds to an overseas financial institution that then lends directly to Korean companies operating in that market.

Under the on-lending model, a policy finance institution supplies funds to an intermediary — in this case DBK — which in turn lends to the end borrowers. DBK will use K-SURE's backing to raise low-interest funds from global banks and deploy them as loans for projects in Kazakhstan that involve Korean companies.

The arrangement allows DBK to lower its funding costs while giving Korean firms on the ground easier access to project financing.

K-SURE also signed an MOU with DBK on Tuesday on the sidelines of the Korea-Kazakhstan Business Round Table, held to coincide with a visit to South Korea by the Kazakhstani president.

Under the MOU, the two sides will jointly identify projects in Kazakhstan with Korean participation and work to ensure additional financing can be mobilized quickly, underpinned by a financial cooperation framework of up to 200 million euros.

"This support carries great significance in that it is the first application of the on-lending model, laying the groundwork for Korean companies to enter the Central Asian market," K-SURE President Jang Young-jin said. "We will continue to expand cooperation with overseas financial institutions so that Korean companies can secure new contract opportunities in emerging markets."


oskymoon@heraldcorp.com