The ratio of bank loans to smaller firms slumped to a historic low while that for large-cap companies continued to rise, data showed Wednesday, showing a widening gap between funding circumstances for smaller firms and large businesses.

The portion of bank loans to smaller firms reached 78.7 percent as of the end of November, down from 88.8 percent in January 2007, according to data by the Bank of Korea. In contrast, the ratio of loans extended to large-cap firms nearly doubled to 21.3 percent from 11.2 percent over the cited period.

By volume, smaller loans rose 51.6 percent to 463 trillion won ($414 billion) as of end-November, while large-cap corporate loans more than tripled to 125 trillion won, according to the data.

The data comes as the government is stepping up efforts to help boost funding channels for smaller firms on concerns banks will bolster their conservative lending stance amid lingering eurozone concerns and other economic uncertainties.

In January, financial officials, including Finance Minister Bahk Jae-wan and Financial Services Commission Chairman Kim Seok-dong, vowed to step up policy support and urged heads of financial firms to reinforce support for smaller firms and new start-ups.

Earlier data, however, showed banks are likely to refrain from lending to smaller firms for the time being amid lingering eurozone concerns and other external uncertainties.

According to a BOK survey of 16 banks, the index measuring their lending attitude to smaller firms came in at zero for the January-March period, compared with 9 in the previous quarter. In contrast, the index for big business rose to 6 from 3 three months earlier.

The survey also showed that an index gauging the credit risks of smaller firms, or the likelihood of defaulting on debt, came in at 28, more than doubling from 13 tallied in the previous quarter.

Market watchers warned a polarization of lending attitude could hamper the real economy and hurt the overall business sector.

“Banks should focus on providing capital to firms who are in need in order to sustain the real economy. But amid risks, banks are shying away from lending to smaller firms with relatively high risks compared with bigger companies,” said Hong Soon-young, a researcher at Korea Small Business Institute.

“If this trend continues, it may trigger a vicious cycle of capital funding for smaller firms regardless of their growth potential,” he said. 

(Yonhap News)