Korea Credit Guarantee Fund and Its Contribution to the Korean Economy

2. Credit guarantee procedureThere are two methods in credit guarantee procedure, which are direct and indirect method.The direct method is the most common type in which KODIT conducts credit investigations andcredit evaluation on applicants and decides whether or not it extends guarantee for theapplicants. In 2005, 97% of all credit guarantees were provided through this method. Whereasunder the indirect method, KODOT entrusts banks with all the operations for credit guaranteesincluding credit investigation and issuance of the letter of credit guarantees. Currently, twotypes of indirect guarantee, general indirect guarantee and special indirect guarantee, are inoperation. Through trustee contracts with KODIT, 13 banks are participating in the generalindirect guarantee program under which the participating banks have the discretion to providecredit guarantee up to KRW 100 million. The special indirect guarantee program is open onlyfor the Industrial Bank of Korea (IBK) which allows IBK to extend guarantees to cooperatives.Figure 3 Classification of credit guarantee services 1010 Refer to Table 13.112