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Managerial Improvement Loan (MARUKEI Loan) for Small Businesses

ADFIAP International CEO Forum VII November 18, 2010, Siem Riep , Cambodia. Managerial Improvement Loan (MARUKEI Loan) for Small Businesses. JAPAN FINANCE CORPORATION Micro Business and Individual Unit (JFC-Micro). Taro MORITA International Cooperation Office. Content.

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Managerial Improvement Loan (MARUKEI Loan) for Small Businesses

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  1. ADFIAP International CEO Forum VII November 18, 2010, SiemRiep, Cambodia Managerial Improvement Loan (MARUKEI Loan) for Small Businesses JAPAN FINANCE CORPORATION Micro Business and Individual Unit (JFC-Micro) Taro MORITA International Cooperation Office

  2. Content • Introduction of JFC-Micro • “MARUKEI Loan” Program • Appendix • 1. Collaboration with Business Supporters • 2. JFC-Micro’s International Cooperation

  3. 1. Introduction of JFC-Micro Establishment of Japan Finance Corporation National Life Finance Corporation (NLFC) Japan Finance Corporation (JFC) (Oct 1, 2008) Japan Finance Corporation for Small and Medium Enterprise (JASME) International financial operations For SMEs Agriculture, Forestry and Fisheries Finance Corporation (AFC) Micro Business and Individual Unit (JFC-Micro) Japan Bank for International Cooperation (JBIC) JICA Small and Medium Enterprise (SME) Unit Overseas economic cooperation operations Agriculture, Forestry, Fisheries and Food Business Unit (After 2012) Okinawa Development Finance Corporation (ODFC) Shoko Chukin Bank Stock corporation Japan Bank for International Cooperation (JBIC) Development Bank of Japan Stock corporation Japan Finance Corporation for Municipal Enterprise Abolished

  4. 1. Introduction of JFC-Micro Overview of JFC-Micro JFC-Microis one of the units of JFC, and has been providing direct loans to Micro and Small Enterprises(MSEs) and individuals, which have difficulties in obtaining enough funds from private sector.

  5. 1. Introduction of JFC-Micro Characteristics of JFC-Micro Loan (As of the end of March, 2010) *NPL = Loans to borrowers in legal bankruptcy + Past due loans in arrears by 3 months or more

  6. 1. Introduction of JFC-Micro Comparison with Private Financial Institutions (As of the end of March, 2010)

  7. 1. Introduction of JFC-Micro JFC-Micro’s LoanPrograms Ratio of Loans Outstanding in number (as of the end of Mar. 2010) 24.0% 53.0% 13.8% 9.3%

  8. 2. “MARUKEI Loan” Program What’s MARUKEI Loan? • MARUKEI Loan was established in 1973. (“MARUKEI Loan” is popular name of “Managerial Improvement Loan.”) • MARUKEI Loan is a system to financially complement “the Managerial Improvement and Dissemination Services”for small businesses implemented by Chamber of Commerce and Industry(CCI) or Society of Commerce and Industry(SCI). • The purpose of MARUKEI Loan is, by providing small loans, to enhance the effectiveness of management counseling by CCI or SCI and realize managerial improvement of small businesses. • MARUKEI Loan is extended by JFC-Micro without taking any collateral or a guarantor on the basis of recommendation from CCI or SCI.

  9. 2. “MARUKEI Loan” Program Target and Condition

  10. 2. “MARUKEI Loan” Program Policy Framework “Act on Supporting Small Business by CCI/SCI” “Basic Guideline to CCI/SCI” formulated by the Minister of METI Otheroperation Otheroperation “The Managerial Improvement and Dissemination Services” MARUKEI Loan Subsidy CCI SCI Government Small Businesses Counseling by Management Counselors on finance, tax, accounting, labor, transaction, innovation, management, ICT, environmental measure, etc.

  11. 2. “MARUKEI Loan” Program CCI and SCI CCI and SCI are special legal entities aimed at developing regional commerce and industry.

  12. 2. “MARUKEI Loan” Program Management Counselor CCI and SCI employ certified Management Counselors. <Must correspond to any of the following> • Having received the official training course • Having experience on management counseling or business management for a certain period • Being qualified as CPA, Licensed Tax Accountant or SME Shindan-shi Mr. T, Management Counselor of XXX SCI I visit small businesses in the region on a daily basis, and I offer counseling on various managerial matters. It is called “Circuit Management Counseling.” When I am consulted on a financial matter, I sometimes recommend to apply for MARUKEI Loan. Since I keep close contact with managers of small businesses, I know well about their personality, business situations, human relationship and even their family.

  13. 2. “MARUKEI Loan” Program Procedure for the Loan (4) Recommendation and application for the loan CCI or SCI JFC-Micro Analysis Approval Approval from the Chairman Assessment Committee Recommendation letter, etc. (3) Management Counselor Close Relationship Management counseling (1) Application for recommendation (2) (5) Loan Small Businesses

  14. 2. “MARUKEI Loan” Program Results of the Loan • The latest results of the loan • Composition ratios by industry(Number of loans disbursed in FY 2009) Wholesale Manufacturing Others Construction Retail Service

  15. 2. “MARUKEI Loan” Program Key Concept of MARUKEI Loan Linkage between managerial support and financial support • CCI/SCI • Wide network • Information on regional small businesses • JFC-Micro • Fund for loan • Knowhow on lending (monitoring, etc.) Close Relationship Meeting, Seminar, Information exchange Linkage Management Counseling MARUKEILoan • Small Businesses • Getting no collateral/guarantor loan • Improving management • CCI/SCI • Enhancing the effectiveness of the management counseling • JFC-Micro • Alleviating the problem of information asymmetry

  16. 2. “MARUKEI Loan” Program Frequently Asked Questions (1) • Does CCI/SCI take management counseling fees from small businesses? • No, counseling is provided without any fees. • How does CCI/SCI cover the operational cost? • CCI/SCI is operated by annual member fees and government(central and local) subsidy. Counseling services are offered to non-member small businesses as well. • Who takes credit risk of MARUKEI Loan? • JFC-Micro takes all risks. Loan contract is made between JFC-Micro and small business borrower. • Does JFC-Micro pay a commission to CCI/SCI? • No, JFC-Micro dose not pay any commissions. • Does JFC-Micro approve all of the recommendation from CCI/SCI? • No. JFC-Micro can reject the recommendation. However, in reality, most of them are approved.

  17. 2. “MARUKEI Loan” Program Frequently Asked Questions(2) • What kind of action do JFC-Micro and CCI/SCI take in case of payment delay? • JFC-Micro monitors borrowers in cooperation with CCI/SCI. • What does JFC-Micro do in case of default? • JFC-Micro makes every effort for collection. If repayment is not expected, JFC-Micro will write off the loan. • Does CCI/SCI take any responsibility for NPL ? • No, CCI/SCI does not have any legal responsibility. • How about the NPL ratio of MARUKEI Loan compare to other loan ? • Roughly, a little higher than other loan programs. (It is difficult to compare accurately since the different calculation method is adopted.) • Are there any possibilities of corruption between Management Counselor and small business borrowers? • To avoid such situation, JFC-Micro keeps close relationship with CCI/SCI and checks carefully each recommendation before approval.

  18. CCI SCI Appendix 1 Collaboration with Business Supporters Close Relationship Business Supporters JFC-Micro SME Management counseling MARUKEI Loan ＋ Managerial advice on EHB Environmental Health Trade Association ＋ EHB Loans SMRJ, Local Government Technical support for entrepreneurs Business Startup Loan ＋ University, College NPO Financial and managerial advice General Loan Licensed Tax Accountant ＋ Special Loan SMRJ: “Organization for Small and Medium Enterprises and Regional Innovation, Japan”

  19. Appendix 2 JFC-Micro’s International Cooperation JFC-Micro has accumulated unique knowhows on Micro and Small Enterprise finance , such as credit analysis techniques, over the past 60 years. Recently, not a few foreign countries requested JFC-Micro to transfer its experience, knowledge and techniques. In order to meet these demands, JFC-Micro established International Cooperation Office in 2001. • Participating in ODA technical assistance projects by MOF, JICA, etc. in the field of SME/MSE finance • Dispatching experts to international conferences and seminars related to SME/MSE finance or microfinance. • Accepting foreign study groups and dispatching staff to seminars held in Japan to give lectures.

  20. Thank you for your attention! Contact Us. International Cooperation Office, Japan Finance Corporation, Micro Business and Individual Unit (JFC-Micro) <E-mail> morita-t@jfc.go.jp <Website> http://www.k.jfc.go.jp/pfce/indexe.html

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