The Korea Local Administration Review

This study investigates the effects of interest subsidy through the examination of concrete data in natural experiment situations. Due to changes in the interest subsidy policy, low credit self-employers who received their loan through a loan guarantee were able to simultaneously distinguish between cases of receiving and not supporting the subsidy. The differences between the default rate and the survival period were examined through multiple regression analysis using STATA. The analysis found that those who received the interest subsidy had an increased probability of the assurance institution subrogating the bank on behalf of the debtor by 1.1%. The survival period was shortened significantly; it was shortened by 50 days for delay, and 38 days for default. Thus, in the case of low credit self-employers, the subsidy effect increased the default rate and decreased the survival period of the enterprise. This is a result of the banking sector not being accessible, as well as follow–up support for low credit self–employers not being provided. Low-income self-employers often have multiple debts. Because of this, it may be more reasonable to delay and default on public sector debts. Therefore, this study suggests that a more systematic and delicate approach is needed within the design and implementation of policy enforcement in order to include subsidy support and loan guarantees.

□ Keywords: Policy Funds; Interest Subsidy; Public Credit Quarantee; Small Business Loans; SMEs; Loan Guarantee; Regression Analysis; Seoul Metropolitan Small and Medium Industry Development Fund