[Edaily Marketin Soyoung Park Reporter] “It’s not that there’s no money in the regions. Funds are available, but because the infrastructure connecting investors, companies, policy-based financial institutions, and private capital is lacking, money isn’t circulating within the regions.”

These remarks were made by capital market practitioners working to solve regional issues, who cited this as “the reason why regional investment remains a one-time event and fails to take root.” They attended the “3rd Local Special City Forum,” held over two days and one night from the 17th to the 18th in Cheongdo County, North Gyeongsang Province, where they shared their experiences under the theme “Where Does Regional Money Come From and Where Should It Flow?” During the event, discussions centered on how various forms of capital—including banking, credit guarantees, impact finance, and venture capital—could be connected to local businesses and initiatives.

The Local Special City Forum is a platform that connects practitioners tackling regional issues with people and resources from various sectors—including government, business, academia, finance, and the media—to support each other’s next steps. It has organized annual forums, regional field trips, special features in monthly magazines, and Action Labs. This year’s annual forum was held under the theme “100 Practitioners Creating Regions Where People Want to Stay.” It was hosted by the Local Special City Forum Preparatory Committee and co-organized by Root Impact and World Vision. The Cheongdo Innovation Center served as the local host.

The government and local governments are expanding various funds and policy-based financial resources to stimulate regional investment. However, while funds are flowing into the regions, there are still no signs of a revival in venture investment. In fact, according to data compiled by Korea Venture Investment Corporation (KVIC), approximately 70% of domestic venture investment from 2021 to 2025 was concentrated in the Seoul Metropolitan Area. Venture capital (VC) offices also exhibit a concentration phenomenon, with about 90% clustered in the Seoul Metropolitan Area.

There are also numerous cases where regional companies fail to secure funding as they transition from the initial investment stage to the scale-up phase. This is why some companies relocate their research centers or branch offices to other regions in an effort to attract investment from regional funds. Kim Min-soo, a partner at Impact Square, explained, “Many early-stage companies actually struggle with growth after confirming their initial product and product-market fit (PMF),” adding, “This is because they are not receiving sufficient funding tailored to their growth stage.”

There are also voices suggesting that an equity-investment-centered funding model does not align with the characteristics of regional companies. Partner Kim Min-soo noted, “While a significant portion of regional policy funds is provided primarily through equity investments, not all regional companies aim for rapid scaling up and an initial public offering (IPO).” He added, “For example, cooperatives or social economy organizations rooted in the region that address social issues may be better suited for loans or project financing.”

It is difficult to expect that money will naturally circulate within the regional venture ecosystem simply by expanding the supply of funds. Accordingly, industry insiders viewed a model in which △banks △guarantee agencies △and local governments share roles as a potential alternative. When companies are founded in regional areas, it is often difficult to secure bank loans due to a lack of financial track records and collateral. However, if guarantee agencies assume the risk and local governments subsidize interest payments, it becomes possible to attract bank funding.

BNK Financial Group is a leading regional financial institution that has established such a model in collaboration with Busan City and the Korea Technology Finance Corporation. BNK has set up a financial support system targeting regional carbon-reduction technology companies. Under this model, BNK provides the loans, the Korea Technology Finance Corporation issues the guarantees, and Busan City subsidizes the interest costs. A total of 20 billion won in working capital was provided to 42 companies.

Industry insiders unanimously agreed that there is also a need to cultivate intermediary organizations capable of channeling funds within the region. This stems from the assessment that even if the central government expands policy-based financing, funds will struggle to reach their intended destinations if there is a lack of organizations capable of identifying actual local issues or investment opportunities and connecting them with capital. Ultimately, the emphasis should be placed not on “how much money is supplied,” but on “how to make the money circulate.”

Jeon Seung-beom, Director of the Korea Social Value Solidarity Fund, stated, “There is a gap emerging between the voices on the ground—which indicate there are many places to invest in the regions—and the way the capital markets actually respond,” adding, “It appears necessary to foster entities that can connect capital while understanding regional issues.”

Participants at this year’s annual forum did not limit regional finance to venture capital but instead examined bottlenecks across a range of capital instruments, including banking, guarantees, policy-based finance, and impact finance. In particular, participants agreed on the need to identify and network “regional capitalists” who understand local contexts and can connect them with actual capital. They also decided to archive case studies of regional financial successes and failures to facilitate collective learning. The goal is to develop distinct financial models for each region that reflect the unique characteristics of local industries and assets.