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Interview with Mr Chongsoo Lee, CEO of Impact Finance Korea

Updated: Jan 3, 2020

What is the driving force that has been leading the company since the beginning? Do you have any specific motivation that you have been following?

I’ve been in this field for almost 20 years, both in the social and the commercial area of it, through the Social Solidarity Bank, Korea Social Investment and other, non-profit foundations. While working for those organizations, I realized that NPOs (non-profit organizations) had certain limitations. NPOs can receive donations from the public but, as a regulation, they cannot invest money. However, to finance social projects, sometimes we need investments. That is one of the reasons why we need companies where we can invest money in such projects, which was the start of IFK. IFK has a subordinate company called Impact Bridge which is licensed by the finance authorities. We can organize funds for specific projects there and then utilize them for investment purposes. Sometimes, we cooperate with NPOs because we cannot receive donations, so such cooperation makes the process more convenient. The second reason is that, as I explained, the role of the government has been predominant in this field and, consequently, the private sector used to be very weak. But I think it’s better to have private funds in the social sector, so that we can communicate with the government on equal basis, instead of just blindly following them.

Who is the main target of IFK’s investments and what are their goals?

In the case of the Social Solidarity Bank, its target is individuals – microcredit financial services for people with low credits. Korea Social Investment focuses on social enterprises and companies. In the case of IFK, on the other hand, our clients are the intermediates. So, we take the role of the fund of funds. Our product will be financing of projects of both individuals and companies. Microfinance is similar to lending fishing tools along with teaching the individuals how to fish. Besides, financing can be compared to building fishing ships, a financial instrument to the fishing industry. Its scale is bigger and in terms of banking, it includes retail banking and corporate banking.

Among the areas of youth, environment and community, which one do you consider to be of utmost priority to IFK?

Actually, there are plenty of issues in Korea now, but we have set up 4 main areas to focus on: youth, well-aging society, sustainable environment and local regeneration. However, sometimes our projects are a combination of youth and local community, or environment and local community, mixed with the problem of aging. Therefore, we have 4 main areas which in some cases might overlap.

We can see that there are significant differences between those areas. Can you explain how does the IFK combine them to work with?

Basically, we can see that they are totally different, so it depends on the project. For example, one of the projects we’re building now is for "teenage runaways" ("가출청소년"). There are teenagers who do not like their families, so they just leave home and wander around. Sometimes they even commit crimes and, as a result, are put in youth detention centers, which are similar to prisons. But those centers have limited space, so there is also the option of a probation service, which means instead of sending them to prison, the government lets them improve themselves in the society under some specific conditions. There is a non-profit corporation helping those children called “Sepuma” - "World Embracing Youth". Five years ago, there was an NPO similar to that, they even built a big new school in Pocheon with nice buildings and a dormitory. However, in the end they had to close it down - we all know that managing such a project is not an easy task. They gave everything to "Sepuma", their assets and everything else. What we do is helping them with the transfer to the school facilities and area, as well as moving the children there. On the other hand, we take "single mother" ("미혼모") into consideration as well. Not only that, but also in Pocheon area there are many elderly people. They are getting older and older, so they need someone to look after them. Of course, there are caring systems for them like nursing homes, assisted living or protection services but our idea is that all those young people, elderly people and single mothers can help each other. We are planning and designing a community care system where they all live together and take care of each other.

Our next question is related to a specific project that was organized at the end of last month. There was a networking event for entrepreneurs outside of Seoul. Firstly, why did you create this event and why do you think it was important?

The local community is now collapsing. This is one of our major problems. I think that there is no other solution than young people taking part in the local community. Therefore, we try to match and revitalize the communication among young people in the local community.

Secondly, what kind of business and entrepreneurship are they intending to do?

We invited 20 local creators with different projects. There is one in Namhae County called Farmfra, a group of young people building small houses on their own while conducting a smart farming experience in their Farmfra zone. Another example is a very interesting case in the city of Mokpo. Nowadays, many young people have become sick of living in big cities. "Empty public" ("공장공장") project organizes some sections for those who are tired of the big city life and their demanding jobs. The project selects 60 people for a 6-week program where they live together and discuss among themselves how to live in their own way. Almost half of those 60 participants in the program later began living in the Mokpo area and has found a job there or even created their own jobs. The fact is that Mokpo has both a new city and an old town, but because everyone keeps moving to the new city, the old town has become emptier. So, people from this project have been recreating that old area. Let me introduce another project in Jeolla Province: "Laundry lab" ("청춘세탁연구소"), which has successfully developed cleaning chemicals. Also, there is a project for the development of coffee products in the Gangneung area which is famous for its coffee street. As you can see, there is a variety of businesses in progress.

Finally, what is the most challenging thing that those small businesses face when they try to establish themselves outside of Seoul, especially in those small cities?

I think the first thing is funding. Especially in the rural areas, there is not much support they can receive. Of course, local governments always try their best to support young people but still, it is not on a large scale. The second challenge is expertise. Whenever young people try something new, they have only limited experience and know-how, that’s why IFK tries to provide them with both training and consulting in addition to financing.

There are small projects which help students with their financial problems, like university intiatives. Do you also support that kind of projects?

In fact, when I worked at the Social Solidarity Bank, I raised a fund of 20 million dollars from Korea Life Insurance Association and used that money to support students who come from low income families. Such students used to borrow money with high interest, about 20-30% or more. We provided a loan for those students and changed it to low interest of just about 2%. By doing so, we helped around 3 500 students to save a lot of money. On the other hand, more and more young people need money, so sometimes they have to take a loan from a secondary financial market with really high interest. I know that in some universities, such as Hanyang University, there are internal microcredit foundations. They have a microfinance system like Youth Union, etc. I think it is a good idea to mobilize some organizations like that to cover this problem.

Next, we’ll move on to some questions related to foreigners. Is there any chance for foreigners to receive benefits from IFK?

Actually, no. I have worked on many projects related to foreigners, such as micro remittance. Remitting money outside the country is important, but because foreigners are just individuals, they have to pay high commission fees to the bank. I have a couple of ideas about solving this problem but in the case of IFK, it provides financing only for projects on a larger than the individual scale. If it is a foreign project which is on a larger scale and involves various social resources, then yes, that can be our target project. But please remember that we do not provide direct financing for specific social enterprises. Unfortunately, not only those of foreigners but, indeed, any kind of individual projects, are not our target.

What message would you like to send to the foreigner students in Korea or those who intend to come here?

Korea is very fast-paced. From the Korean War until today, we have witnessed a big change. We can’t see such a rapid development in any other country. During these 70 years, many things have happened. We have achieved great success in terms of economic development, which developing countries can learn from. Korean people consider educating kids one of the most important things but, on the other hand, it also creates a lot of social problems such as pressure and competition. Everything has two sides, so what I want to say here is related to the Korean word "nanum" ("나눔" - dividing/sharing). Sharing is good, but at the same time, it can be dividing. Let me give an example, Gwanghwamun is the gathering point for the conservatives, while Seocho is the progressive area. So, that’s one of the negative aspects you shouldn’t follow. Instead, foreign students can learn how Korea has achieved its incredible economic growth in such a difficult time.

Thanks to the interview with Mr Chongsoo Lee, we came to understand in depth some seemingly difficult and specialized financial terms. In addition, he shared with us the importance of the private sector in providing financial services to the society, especially when it comes to solutions to social problems and their implementation. Through its investment, mainly in the four issue areas of youth, well-aging society, sustainable environment and local regeneration, IFK is doing its best for stabilizing social values in Korea. Like Mr Lee said, “We cannot find a new road on an old map”, we hope that our audience will be inspired by this kind of social-centralized activities and come up with wonderful ideas for the sustainable development of the world in the future.

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