From Traditional Gye to Social Finance in Korea (Part 2)

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 In the previous article, I explored gye, one of Korea’s traditional community-based practices. In the past, when ordinary people had limited access to formal financial institutions, gye functioned as a form of financial community. In my view, this tradition has evolved into what we now call social finance.

 

👉Reread Part 1
Korea’s Traditional Community Finance “Gye”: Its Expansion into Social Finance (Part 1)

 

In this article, I will examine how Korea’s traditional gye culture has connected to modern social finance, and how this transition has taken place.

 

Funding is always essential for running a business. For small-scale social impact organizations, social finance helps enhance sustainability and expand the ecosystem.(Photo by Milly) 

What is Social Finance?


So, what exactly does “social finance” mean in the Korean context?

 

Social finance refers to financial activities that go beyond generating profit and instead aim to solve social problems and create social value.

 

These social issues can include job creation, community development, climate change response, and more. In simple terms, social finance is about using financial tools to make society better.

 

Social finance operates in various ways. It may involve providing loans or financial support to social economy organizations or social innovation enterprises. It can also include grants, subsidies, and even impact investments.

 

This kind of financing plays a crucial role for social impact organizations such as social enterprises, cooperatives, village enterprises, self-reliance enterprises, and social ventures. Many of these organizations are small or in early stages, making it difficult to access traditional financial services. Social finance helps fill this gap.

 

👉Read related posts
Social Finance: The Flow of Money That Changes Society

 

Similarities and Differences Between Gye and Social Finance


What do gye and social finance have in common?

 

Both are based on community participation and trust. They also share a focus on social purpose rather than purely individual profit.

 

However, there is a key difference. Gye operates informally within communities, while social finance is part of a formal, institutional financial system.

 

Despite this difference, both share the same underlying philosophy: solving financial challenges through community-based cooperation. In fact, systems based on trust and relationships have existed in Korean society for centuries.

 

Efforts to Expand Social Finance in Korea

 

Despite its importance, social finance still represents a relatively small portion of the overall financial market in Korea. As a result, there have been ongoing efforts to expand it.

 

One notable example is the attempt to establish a social bank starting in 2020. A cooperative model called “Social Solidarity Credit Union” was proposed, backed by legal consultations and capital contributions.

 

Based on my reporting at the time, this initiative emerged during the COVID-19 crisis, when many social impact organizations faced serious financial difficulties. Because these organizations are often small, they struggled to access traditional loans. The goal was to create a financial system tailored to their needs. However, the initiative was ultimately not approved by financial authorities.

 

More recently, efforts have shifted toward establishing a “value-based financial cooperative.” This model aims to build a Korean-style value finance system centered on citizens and local communities. On March 19, a declaration for this initiative was publicly announced. These developments show that efforts to expand social finance in Korea are continuing.

 

☆Conclusion

 

Gye should not be seen merely as a traditional cultural practice. It represents a long-standing way for communities to manage financial flows and solve economic challenges together—essentially reflecting the philosophy of social finance.

 

Modern social finance also begins with the same question:
how can finance contribute to solving social problems?

 

❓What does social finance look like in your country?

 

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