Policy Finance
정책금융
A mode of finance in which the government intervenes to allocate credit to sectors that private financial markets fail to serve adequately. In South Korea, after the Park Chung Hee regime nationalized the banks in 1961, policy finance became the core instrument of the Economic Development Plans, channeling low-interest loans, foreign-loan guarantees, and selective credit allocation to export firms and strategic industries. The chaebol leveraged this state-directed credit to expand far beyond their own equity, institutionalizing the structural asymmetry of the Korean developmental state: private profit, socialized risk.
Sources
- encykorea.aks.ac.kr Encyclopedia of Korean Culture: authoritative Korean-language definition of 정책금융 as government financial intervention to compensate for market failures in credit allocation; periodization of Korean policy finance from the 1950s through the 2000s, including the 1960s transition to a full policy-finance system under the military government, the 1970s expansion for heavy-chemical industrialization, and the instruments used (direct lending, interest subsidies, on-lending, credit guarantees)
- documents.worldbank.org World Bank Research Observer (Vittas & Cho, 1996): theoretical foundations of policy-based lending; analysis of Japan and Korea as relative successes of directed credit; essential conditions for effective policy finance including reliance on private sector, export orientation, government-business consultation, and credible development plans; contrast with widespread failures of directed credit in other developing countries
- countrystudies.us U.S. Library of Congress Country Studies: Park Chung Hee's nationalization of all commercial banks in 1961, government control over foreign borrowing and institutional credit, and the resulting centralized direction of business credit
- fsc.go.kr Financial Services Commission of Korea: official periodization labeling the 1970s as the 정책금융시대 (Policy Finance Era), during which the HCI drive and emergency financial measures (8.3 measure, institutionalization of curb-market funds) were carried out through policy-based credit