14. session 6 fukanuma jpn ppt

7/28/2019 14. Session 6 Fukanuma JPN PPT

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ADB-OECD Workshop on Enhancing

Financial Accessibility for SMEs

2013/3/7 Session 6

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The First ADB-OECD Workshop on Enhancing Financial Accessibility for SMEs

-Lessons from Asian and OECD Areas Crises -

ADB Headquarters, Manila, Republic of the Philippines

Public Finance :

Impacts on SMEs Access to Finance

Principal Economist

Japan Finance Corporation Research Institute

Tokyo, Japan

Hikaru FUKANUMA

March 7th 2013

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Definition of SME in Japan

Type of Industry

Small and Medium Enterprise

( to fulfill either of the criteria)Small ScaleEnterprise

Capital Stock (Yen) Employees Employees

Manufacture and Others 300 mil. or less 300 or less 20 or less

Wholesale 100 mil. or less 100 or less

5 or lessRetail 50 mil. or less 50 or less

Service 50 mil. or less 100 or less

Definition in SME Basic Law

Number of SMEs (2009)Large Enterprises: 11,911 (0.3%)

SMEs: 4,190,719 (99.7%)

Small Scale Enterprises: 3,659,291 (87.0%)

Ministry of Internal Affairs and Communications of Establishment and Enterprise

Census of Japan


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Bank of Japan, Short term Economic Survey of Enterprise, JFC Research Institute,

Quarterly Survey on Small Businesses in Japan

Note: DI = Percentage for Easy - Percentage for Difficult

Financial Position of SME

Financial Position DI Large Enterprises

SMEs

Micro Businesses

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

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1. Information Asymmetry

between Bank and SMEs

2. Insufficient Collateral

3. Economies of Scale of Lenders

4. Weakness against Shock

(Economic Shock, Natural Disaster)

Financial Constraints of SME

Why do SMEs have difficulties to obtain fund?


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External Finance Measures for SMEs

Direct Finance

StockPublicly-offered

Privately-offered

BondPublicly-offered

Privately-offered

Commercial Paper

Indirect Finance Borrowings(Loans)Private financial institutions

Policy-based financial institution

Others

Credit Supplementation SystemCredit GuaranteeCorporations

Trade CreditDeferred payment credit

Bills payable, Account payable, Others

Capital Lease

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Fund-raising Structure

Small

Companies

Large

Companies

Equity Capital (Direct Finance) 7.6 % 42.3 %

Borrowings

(Indirect

Finance)

Financial Institutions 34.9 % 17.7 %

Others 24.8 % 4.5 %

Trade Credit (Bill Payable, Account

Payable, etc.), Other Debt32.7 % 35.5 %

Total 100.0 % 100.0 %

Small Companies: Capital stock is less than \10 mil.

Large Enterprises: Capital stock is more than \1,000 mil.

Ministry of Finance, Financial Statements Statistics of Corporation by Industry

(As of March 31, 2012)


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Financial Institutions for SMEs

SMEs

City Banks

Regional Banks

Other Banks

Credit Associations

Credit Cooperatives

Non-banks

Loan

Guarantee

Insurance

DepositBanks

Finance CompaniesFactoring CompaniesCredit Card Companies

Private

Policy-based

Cooperatives

Japan FinanceCorporation

(JFC)

Micro Business and Individual Unit

Small and Medium Enterprise (SME) Unit Credit GuaranteeCorporations

Local Government

Shoko Chukin BankSpecial Company

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Bank of Japan, Monthly Financial and Economic Statistics and other sources. Non-banks and

local governments lending are excluded.

(As of the end of Dec. 2012)

Loans Outstanding to SMEs

Type of Financial InstitutionsBalance

(billion yen)Share (%)

Private Financial Institutions 221,060 90.8

BanksCity Banks, Regional

Banks, Other Banks170,539 70.0

Cooperative

Financial Institutions

Credit Associations 40,990 16.8

Credit Cooperatives 9,531 3.9

Special Company (Shoko Chukin Bank) 9,530 3.9

Japan Finance Corporation (JFC) 12,997 5.3

Micro Business and Individual Unit 6,458 2.7

Small and Medium Enterprise (SME) Unit 6,539 2.7

Total 243,588 100.0


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Profile of JFC(1)

StatusPolicy-based financial institution

100% owned by the Japanese government.

Purpose

To contribute to the sound socio-economic

development of Japan and to improve the lives of

Japanese citizens.

Not to Maximize Profit

Establishment

October 1, 2008

(Oldest Predecessor NLFC was Established in

1949)Capital 5,302 billion yen (as of Apr.1, 2012)

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Profile of JFC(2)

Branch

Offices152 (in Japan)

Employees 7,460

Outstanding

Loans

(as of Mar. 2012)

Micro Business and Individual

Unit 7,470 billion yen

Small and Medium Enterprise

Unit6,437 billion yen

Agriculture, Forestry, Fisheries,

and Food Business Unit2,632 billion yen


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11JFC

J FCBonds

Source of Fund

FILPSpecial Account

Loan

FILP Bonds

Government-guaranteed

Bonds

GeneralAccount

EquitySubsidy

FILP: Fiscal Investment and Loan Program

Dividends, etc. Deposit

Loan

Government

Special AccountSurplus Reserve, etc

IndustrialInvestment

SpecialAccount

Financial MarketGovernment Own

Stocks

FILP

Bond Issue

Money Flow

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National Life FinanceCorporation (NLFC)

Small and MediumEnterprise (SME) Unit

Japan Finance

Corporation (JFC)

Micro Business andIndividual Unit

Japan Finance Corporationfor Small and MediumEnterprise (JASME)

(After 2021)Okinawa DevelopmentFinance Corporation

(Oct 1, 2008)

Agriculture, Forestry,Fisheries and FoodBusiness Unit

Agriculture, Forestry andFisheries FinanceCorporation (AFC)

Establishment of JFC


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SME Finance Units of JFCMicro Business and

Individual UnitSmall and Medium

Enterprise (SME) Unit

Predecessor

National Life FinanceCorporation (NLFC)

Est. in 1949

Japan FinanceCorporation for Small

and Medium EnterpriseEst. in 1953

OperationBusiness loans

Education Loans, etc

Business loansSecuritization SupportCredit insurance

Target SMEs micro and small Medium

Maximum loanamount

72 million yen 720 million yen

Average Loanamount

6.5million yen 105 million yen

Employees 4,700 2,000

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Attribute of SME finance by JFC (1)

BorrowersSME/ Micro and Small businesses

Wide range

LoansHuge number (about 1,000,000SMEs)/Small amount

Mid and long term

Less collateral

(No Deposit Service)

Special Loans with Political Aims

(e.g. Earthquake Recovery Loan)

Supporting Business Start-ups


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Attribute of SME finance by JFC (2)

Difficult for private sector to deal with

Risk and CostHigher Risk

More Cost

Complementary Roles

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Official Name Managerial Improvement Loan (Established in 1973)

TargetCommerce and service / 5 or less employees

Manufacturing and other / 20 or less employees

Eligibility Recommendation of Chamber of Commerceand Industry (CCI) or Society of Commerceand Industry (SCI) .

Requirements forthe recommendation

More than 6 months managerial consulting byCCI/SCIMore than a year business in the same areaPay up taxes

(As of Feb. 2013)

Cooperation with Chambers / Societies of Commerce and Industry

Small Business Loan (1)


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Terms and conditions

Maximumamount

15 million yen (= $150,000)

PeriodEquipment: 10 years or less

Working: 7 years or less

Interest rate 1.65% per annual

Remark Collateral or a guarantor is not necessary.

(As of Feb. 2013)


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J FC-Micro

Analysis

Approval

CCI or SCI Members

Managerial

guidance(1) Application(2)

Recommendation

for loan(4)

Credit Committee

Consulting Managers

Evaluation(3)

CCI or SCI

Approval byChairman

Procedure

(5) Loan



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CCI / SCI

ConsultingManagers

JFC

Branchoffices

Keep close contact

Teaching how toevaluate SMEs fromfinancial aspect

Providing usefulinformation onmember SMEs

Giving information

Training & Meeting

SMEsBusiness

SupportFinancial

Support

Close collaboration with CCI/SCI makes it possible toprovide loans without collateral or a guarantor.


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JFCSME Unit

CreditInsuranceSub-unit

PrivateFinancial

Institutions

SMEs

Credit Supplementation System (1)

CreditGuarantee

Corporations(CGCs)

(52)

CreditInsuranceContract

CreditGuaranteeContract

LoanGuarantee

Local Government

SupervisionContribution

SupervisionContribution

Central Government

Supervision

Credit Guarantee System

Credit Insurance System


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Used by 37% of SMEs (Data: as of Mar. 2012)

Average guaranteed amount is 19 million yen (per SME)

Supports 14% of SME Loans

Functioning as a safety net for SMEs

Implementing Safety Net Guarantee for SMEs suffering from credit

crunches, bankruptcy of trading financial institutions or clients, natural

disasters, etc.

Basic Guarantee Fee: 0.5% - 2.2%

Credit Supplementation System (2)

Mobilize Private Finance Institutions (PFIs)

to provide loans for SMEs.

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Public Finance Impact on SMEs (1)

Not so large in volume among total SME loans

outstanding in Japan

JFC SME Loan 5%

CGCs Guarantee 14%

But Complimentary Support for Weaker SMEs

Increases loans when private sectors decrease

Support for Startups

Support Recovery from Natural Disasters

etc.


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Policy-based Financial

Institutions

Private Financial Institutions

Sources: Bank of Japan,Monthly Financial and Economic Statistics and Other Sources.

Lehman Brothers shock

Economic Bubble

-10.0

-5.0

0.0

5.0

10.0

15.0

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

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Micro Business and Individual Unit SME Unit

AmountOver the

previous yearAmount

Over the

previous year

Oct.2008-Mar.2009 729 bil. yen 176% 652 bil. yen 279%

Apr.2009-Sep.2009 1,165 bil. Yen 259% 1.693 bil. yen 620%

Oct.2009-Mar.2010 1,115 bil. yen 153% 1,125 bil. yen 172%

Result of Safety-net Loans

Complied from Bank of Japan,

Monthly Financial and EconomicStatistics and other sources.

Reference

2008 2009 2010

(%)Private Financial

Institutions

JFC



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Public Finance Impact on SMEs (4)Loan Amount / Number of Supported SMEs

Business Startup Loans by JFC Micro

16,465 loans made for SMEs within 1 year after startups,

whose average number of employees is 3.9 person

Created jobs for 64,213 person in one year

JFCs accumulated know-how of credit analysis makes it

possible

The Great East Japan Earthquake Recovery Loan by JFC

support 163,000 SMEs with 2,667 billion JPY loan until

Mar. 2012 (13 month).

Another 37,000 SMEs with 540 billion JPY loan between

Apr. 2012 to Sep 2012 (6 month).

still continue.

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Takezawa et al. (2005)

Special guarantees decreased SMEs defaults in

short term, but did not in long term.Uesugi, Sakai, & Yashiro (2012)

Special guarantees eased SMEs financing and

supported their growth.

Fukanuma, Nemoto, & Watanabe (2008)

Public finance institution loans help faster growth

of startup stage SMEs.

Public Finance Impact on SMEs (5)Empirical Studies (Both Positive and Negative)


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Fukanuma & Inoue (2007)

6.2% of JFC customers might have given up businesses

and 72.9% of them might have some bad effect

if they had not got JFC loans.

Yamori (2010)

12.0% of SMEs that used special guarantees for

Lehman Shock recovery might have stopped their

operation if they could not have got the guarantees

JFC Research Institute & Suzuki (2012)

Business Startups that procured JFC loans at their early

stage increase loans from private banks year by year

Public Finance Impact on SMEs (6)Data by Questionnaires

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Fukanuma, Ishihara, Matsui, & Oota (2013, forthcoming)

JFC customers damaged by the Great East Japan

Earthquake to which JFC made Earthquake RecoveryLoans answers, if JFC had not made loans for them:

Stop operation 27.8 %

Employees Decrease 12.0 %

Sales Decrease 28.2 %

Profit Decrease 26.8 %

Public Finance Impact on SMEs (7)Data by Questionnaires

Factories washed by Tsunami


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Fukanuma, Ishihara, Matsui, & Oota (2013, forthcoming)

Tentatively calculated the positive effect of JFC

Earthquake Recovery Loans. The loans maintained:

601,887 jobs (1.0 % of total employment)

1,711 billion JPY value added (0.4% of GDP)

While, government support for JFC to operate the loans

was 519 billion as tentative cost.

Public Finance Impact on SMEs (8)Challenge to calculate the benefit

Temporally Shops and Offices

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SMEs

Well Performing SMEs

Micro Businesses

Badly Performing SMEs

SMEs making Socially

Needed Investment

Business Startups

Damaged SMEs

(by Lehman Shock,

Earthquake, etc. )

Ordinary SMEsPrivate

Financial

Institutions

(PFIs)

JFC

Complementary Roles of JFCJFC complements private financial institutions by bridging the gap


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Thank You for Your Attention !

E-mail: [email protected]

Web: http://www.jfc.go.jp/english/index.html

Contact Information

Hikaru Fukanuma

Principal Economist

Japan Finance Corporation Research Institute

Tokyo, Japan

14. session 6 fukanuma jpn ppt

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