2011 NPO ETIC. SAL All Rights Reserved. 1

Research Project forJapanese Dormant Account Fund

Table of Contents: 1. Executive Summery2. Brief Overview on Dormant Account3. Case Studies from the UK, Korea and Ireland4. Japanese Dormant Account Fund Scheme5. Dormant Account Fund: Possible Uses6. Using Dormant Deposits for Tohoku Relief7. About Florence and Social Agenda Lab

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1. Executive Summery

Project Overview Duration: 4 months from January 7th, 2011

ResearchQuestions

Process

Summery This project was officially launched on January 7th, and Mr.Komazaki and four skilled

pro-bono workers have conducted a research on dormant account in general, as well as on the precedent cases in the world and on its surrounding environment in Japan.

The output of this research was presented in documents by Mr. Komazaki at New Public Commons Roundtable.

Furthermore, after the earthquake, this project has led to suggesting the use of dormant account fund for the earthquake relief efforts as well.

1. The definition of dormant account and its volume

2. Possible scheme and opinions of stakeholders

1. Research on case studies abroad (Especially the scheme in Korea)

2. Based on the scheme, put together a draft of a feasible scheme

3. Share the draft with stakeholders and receive feedbacks

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2. Brief Overview on Dormant Account

A dormant account is a low-balance savings account which has shown no activity (deposits and/or withdrawals) over a long period, other than posting of the interests and/or service charges.

The definition of a dormant account (the length of time during which the account showed no activity, etc.) depends on each country and its law. There are many cases in which the definition is different amongst the banks as well.

Statute of limitations usually does not apply to dormant accounts, and the deposits can be claimed by their owners or beneficiaries at any time.

In Japan, after ten years of showing no activity, the dormant deposits are counted as the banks’ profit.

There are movements mainly in the developed countries to use the deposits as a fund for providing social and public services, and the establishment of a scheme of dormant account fund and the protection of the depositors’ rights by law is in progress.

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■ The key findings after researching on the precedent cases in the UK, Korea and Ireland

1. The background: there were protests against the banks that were counting the savings in dormant accounts as their profits, which led to movements for using it to provide social services.

2. Due to the public opinion, England and Korea developed an IT system that enabled the individuals to search for the dormant accounts online, making it easier to manage them. This system hasn’t been developed in Japan yet.

3. There was a case in the UK that has established a dormant account fund even though such IT system did not exist in the first place

4. Therefore, it became clear that establishing a dormant account fund in Japan is possible, as the condition in Japan is rather similar to the cases in the world before the creation of such funds

3. Case Studies from the UK, Korea and Ireland

5

Build a reference system that works across financial institutions so that the rights of credit holders are protected and it becomes easier to search for dormant accounts

Build a management foundation regulated/supervised by Financial Services Agency with the citizens as the main actor

Provide special tax benefits to the financial institutions, and raise funds in donation for the managing foundation

Financial Institutions

Financial ServicesAgency

Opening an account

Regulate/Supervise Regulate/

　Supervise

Dormant Deposits

Management Foundation

Donation from Formant Account Fund

Citizens

Money FlowRegulationSupervision

Financial Institution Governmental Institution

Related to Dormant Account

Legend

Dormant Deposits Index

Reference System

NPO Bank

Child ConsultationCenter

Intermediate Support Center

University

Alliance【 Merits for the Financial Institutions 】Tax Benefits,Lower management fees for dormant deposits

Reference to Dormant Accounts

Return of Dormant Account

Management of Dormant Accounts

Data Synchronization of Dormant Accounts

DV Prevention Center

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4. Japanese Dormant Account Fund Scheme

Japanese version of dormant account fund will be implemented on a basis of making financial loans In order to provide the funds effectively for social sector, it would be productive to make alliances with NPO banks,

institutions that provide intermediary supports, Universities, child consultation centers, etc. It would be optimum to implement the fund for both services that require immediate action as well as for services

that require careful and nurturing care

DV Prevention Center

University student

Intermediate Support Center

NPO Bank

UniversityGrad

student

　　 Single-parent

Foreigner

Heavy debtor

Social entrepreneur

　　 Single-parent

Expenses for studying abroad

Designing and operating a research program

Entrance fee for children

Medical services for people without insurance

Consolidating debts

Supporting social entrepreneurship

Moving cost （ e.g. protectionfrom domestic violence)

Interest-freeLoans

Interest-free Loans

Interest-free Loans

Interest-freeLoans

Dormant Account Fund Uses Alliance partners Final beneficiaries Purposes

Japanese Dormant Account Fund

Services that require immediacy

Services that require nurturing care

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4. Japanese Dormant Account Fund Scheme

Example: Using the fund for children from care homes to receive University education 　 The total number of children in care homes is about 30,000 and their university entrance rate is only 10.8%, which is

very low compared to the national average of 53.9% The living expenses of an average University student excluding tuitions in 4 years is about 6 to 7 million yen By lending 30 billion yen from dormant account fund, all the children could receive University education if they wish

References: http://www.e-stat.go.jp/SG1/estat/List.do?lid=000001068770http://www.mhlw.go.jp/stf/shingi/2r98520000011cpd-att/2r98520000011dad.pdfhttp://www.crc-japan.net/contents/notice/pdf/h20_0722.pdf

Data・ Number of Children: 29,753 　（ 2009 ）・ Average years living in a care home: 4.6 years・ Percentage of children entering Universities: 10.8% （ National Average:53.9 ％）・ Main reason of the low entrance rate: financial・ Every year, about 6,500 children leave care homes upon graduation from high schools

Current state of children’s care home

３ ５ ０ ０ people

Required funding isAbout 21 billion yen

30 Billion Yenis enough to fund all the children from care homes who wish to study at Universities

Expenses required・ Tuition ： At least 2.5 million yen （ public University ）・ Living expenses ： 6-7 million yen/4 years・ Other expenses ： fees to take entrance exams, etc. ・ Assumption: the tuition is supplemented by receiving scholarships

Loans of 6 million yen/ person are needed

Assumption: 3500 children from care homes wish to enter Universities at national average rate of 53.9 ％

Expenses required for entering an University

＊ If living expenses of 6 million yen/4 years has to be earned by doing part-time jobs, the children will have to work for more than 150 hours per month at 800 yen per hour 　

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5. Dormant Account Fund: Possible Uses

Assumption: the tuition is supplemented by receiving scholarships

Dormant Account Fund can be established in Japan under three conditions: ① the depositors can easily find their dormant accounts through a online reference system② the banks receive tax benefits ③ transparent external foundation manages the fund

The operation risk can be held down by mainly investing the fund to institutions such as NPO, banks and Universities, and using it only for relatively small loans.

The total amount of dormant deposits that are counted as profits by all the financial institutions is estimated to be about 100 billion/year. If 40% of it is set aside for reclaims by the depositors, 60% of it is surplus. The fund can create a large social impact even if we could only make a use of half of that 60%, which is 30 billion.

Services that require immediate action or nurturing care can only be provided and should be provided on a private foundation scheme.

The operation of the foundation has to be kept transparent under the supervision of Financial Services Agency.

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5. Dormant Account Fund: Possible Uses

The Great Hanshin Earthquake （ 1995）

Recovery Cost:30 Billion Yen

Directly Incurred Cost:10 Trillion Yen

The Tohoku Earthquake （ 2011）

Recovery CostAbout 100 Billion Yen

Reconstruction Projects’ Cost:

About 16 Trillion Yen

Directly Incurred Cost Max. 25 Trillion Yen

Reconstruction CostAssumed to be Enormous

After the Great Hanshin Earthquake, the recovery cost was 30 billion yen, the directly incurred cost was 10 trillion yen and the reconstruction projects’ cost was over 16 trillion yen.

In case of the Tohoku Earthquake, the recovery cost is assumed to be about 100 billion yen and directly incurred cost to be about 25 trillion yen. However, directly incurred cost does not include the effects from planned power outage and individual compensations. Given this fact, the reconstruction cost is estimated to be much greater than it was in the case of the Great Hanshin Earthquake.

Tripled Doubled

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6. Using Dormant Deposits for Tohoku Relief

For the recovery and reconstruction efforts, we need a fund that does not specify its use and could be used for providing varied and fine supports in a timely manner.

When the government or municipal bodies provide the fund for reconstruction, there are three main challenges

1. FinancialIt places an enormous financial burden on local governmentsThe use of the fund is often constrained during the reconstruction period

2. SpeedIt takes time to reach a decision on the spending methodThe fund lacks the speed in terms of utilizing it according to the needs from the affected area that are constantly and rapidly changing

3. FlexibilityIt is difficult to respond to the needs of individual compensationsThere are groups of people who cannot receive the support within the framework of the existing system, including those who have lost the loved ones, those with disabilities and those who have evacuated to other prefectures

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6. Using Dormant Deposits for Tohoku Relief

Using the fund for providing loans for life and wellness of the Tohoku earthquake victims The average amount of special loans provided by the government is 150,000 yen There were about 200,000 houses that were fully-destroyed after the Great Hanshin Earthquake If 30 billion yen from dormant account fund is to be used to provide loans, it will be possible to support all the

families whose houses were fully-destroyed

２ ０ ０ ０ ０ families

Required amount of loansAbout 30 billion yen

０ 30 Billion Yenis enough to make immediate loans toall the families in needs

Reference:http://www.bousai.go.jp/1info/kyoukun/hanshin_awaji/download/index.html

Data・ The scale of the damages from the Great Hanshin Earthquake　 Fully-destroyed houses ： 200,000 houses　 Half-destroyed houses ： 260,000 houses

The scale of damages after the Great Hanshin Earthquake

Expenses required・ The average amount of special loans given to the disaster victims ： 100,000 to 200,000 yen・ The amount of financial compensations after the Great Hanshin Earthquake The average: 150,000 yen In total: 55,000 cases, 80 billion yen　 ＊ People could apply for the compensations 10 days after the disaster for 2 weeks

Assumption: all 200,000 families whose houses were fully destroyed and

require immediate loans

Average amount of loans

Loans of 150,000 yen/ family are required

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6. Using Dormant Deposits for Tohoku Relief

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7. About Florence and Social Agenda Lab

After graduation, he encountered a problem in Japanese society in which it was still very difficult to have a job while raising children. He then decided to establish an NPO called Florence which provides community-based care services for children.

As a social entrepreneur himself, he felt the need of a system that can bring money to private organizations providing social services. Thus, when he learned that there was a movement in Korea which aimed at mobilizing the money from dormant accounts, he started looking for a possibility of doing the same in Japan.

In SAL (Social Agenda Lab), teams that consist of skilled pro-bono workers provide research services to social entrepreneurs, in order for them to effectively and fundamentally solve problems in the society. SAL focuses on research because when tackling social problems, it is crucial to identify their structures, to draw possible solutions and to secure resources by assessing and reporting the value of the social services accurately.

Mr. Komazaki was born in 1979 and entered Keio University in 1999. While he was enrolled in the University, he managed various technologies as business. Hiroki Komazaki /

NPO Florence, CEO

Yoshiaki Ishikawa /NPO ETIC. SAL