Micro Business and Individual Unit
Managerial Improvement Loan (MARUKEI Loan)
for Small Businesses
JAPAN FINANCE CORPORATIONMicro Business and Individual Unit (JFC-Micro)
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Taro MORITAInternational Cooperation Office
ADFIAP International CEO Forum VII November 18, 2010, Siem Riep, Cambodia
Micro Business and Individual Unit
Content
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1. Introduction of JFC-Micro
2. “MARUKEI Loan” Program
Appendix
1. Collaboration with Business Supporters 2. JFC-Micro’s International Cooperation
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1. Introduction of JFC-Micro
Establishment of Japan Finance Corporation
International financial operations
Overseas economic cooperation operations
JICA
National Life Finance Corporation (NLFC)
Japan Bank for International Cooperation (JBIC)
Japan Bank for International Cooperation (JBIC)
Stock corporation
Stock corporation
Abolished
Shoko Chukin Bank
Development Bank of Japan
Japan Finance Corporation for Municipal Enterprise
Japan Finance Corporation for Small and Medium Enterprise
(JASME)
(After 2012)Okinawa Development Finance Corporation (ODFC)
(Oct 1, 2008) Japan Finance Corporation (JFC)
Small and Medium Enterprise (SME) Unit
Micro Business and Individual Unit (JFC-Micro)
For SMEsAgriculture, Forestry and Fisheries Finance Corporation
(AFC)
Agriculture, Forestry, Fisheries and Food Business Unit
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1. Introduction of JFC-Micro
Overview of JFC-Micro
History1949 Establishment of People’s Finance Corporation (PFC)
1999 Reorganized into National Life Finance Corporation (NLFC)
2008 Integrated into Japan Finance Corporation (JFC)
OrganizationStock corporation wholly owned by the Japanese government
Non-profitable policy-based financial institution
Regulatory body Ministry of Finance, and other Ministries
FundingBorrowing from the government, Government guaranteed bonds,
JFC Bonds
Size Branch offices: 152 Employees: approx. 4,700
Loans Outstanding
Business Loans to MSEs 6,531 billion yen (=80 billion USD)
Other Loans 961 billion yen
JFC-Micro is 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.
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1. Introduction of JFC-Micro
Characteristics of JFC-Micro Loan
Borrowers
Micro and small Borrowers with 9 employees or less: 86.2%
Huge number 1,084,043 borrowers
Wide range Not focusing on specific industry or region
Loans
Small amount Average loans outstanding per borrower: 6 mil. yen
Mid or long term 3-7 years: 85.8% , 7-10 years: 8.1% (FY2009)
No collateral Loans without collateral in number: 78.3% (FY2009)
Start-up support Start-up loans to 18,478 entrepreneurs in FY 2009
Risk management loan
9.1% (NPL* ratio: 2.7% + Restructured loan ratio 6.4%)
*NPL = Loans to borrowers in legal bankruptcy + Past due loans in arrears by 3 months or more
(As of the end of March, 2010)
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1. Introduction of JFC-Micro
Comparison with Private Financial Institutions
Number of Institution(s)
Total number of SME customers
Loans outstanding per customer
JFC-Micro 1 1,084,04325% of Japanese enterprises are JFC-Micro’s clients.
6.0 million yen(74,000 USD)
Private banks144 approx. 2,240,000
(15,555 per institution)
79.6 million yen(980,000 USD)City Banks and Regional
Banks
Credit Associations272 approx. 1,210,000
(4,448 per institution)
34.8 million yen(430,000 USD)Regional small financial
institutions for SME
(As of the end of March, 2010)
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53.0%
24.0%
9.3%
13.8%
Ratio of Loans Outstanding in number (as of the end of Mar. 2010)
1. Introduction of JFC-Micro
JFC-Micro’s Loan Programs
General LoanThis loan is available to MSEs in almost all industries. Max. loan amount is 48 mil. yen (= 592,000 USD)
Special Loan
This loan is extended in response to economic and financial policies for MSEs. Max. loan amount is 72 mil. yen. (= 889,000 USD)
Managerial Improvement Loan (“MARUKEI Loan”)
Environmental Health Business Loan (EHB Loans)
This loan is available to MSEs relating to public hygiene, such as restaurants, barber shops, beauty parlors, laundries, hotels, etc.
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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.
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2. “MARUKEI Loan” Program
Target and ConditionTarget of the Loan
Commerce and service business with 5 or less full-time workforces
Manufacturing and other business with 20 or less full-time workforces
Requirements
Getting recommendation from CCI/SCI.
Requirements to get recommendation from CCI or SCI• Receiving management counseling of CCI/SCI for 6 months or more• Being in business for one year or longer in the same district• Fully paying taxes
Terms and conditions
Max. amount 15 million yen ( =185,000 USD)
Payment period Equipment: 10 years or less, Working: 7 years or less
Collateral Collateral or a guarantor is not necessary.
Interest rate 0.3% lower than JFC-Micro basic rate
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2. “MARUKEI Loan” Program
Policy Framework
“Act on Supporting Small Business by CCI/SCI”“Act on Supporting Small Business by CCI/SCI”
“Basic Guideline to CCI/SCI” formulated by the Minister of METI“Basic Guideline to CCI/SCI” formulated by the Minister of METI
“The Managerial Improvement and Dissemination Services”
Other operation
CCISCI Small BusinessesGovernment
Counseling by Management Counselors on finance, tax, accounting, labor, transaction, innovation, management, ICT, environmental measure, etc.
MARUKEI Loan
Subsidy
Other operation
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2. “MARUKEI Loan” Program
CCI and SCI
CCI and SCI are special legal entities aimed at developing regional commerce and industry.
Chamber of Commerce and Industry (CCI)
Society of Commerce and Industry (SCI)
Number 515 1,812
Members Approx. 1,352,000 Approx. 913,000
Location
Mainly established in large cities
Mainly established in small cities, towns and villages
No jurisdictional overlap between CCI and SCI.
Operation
• Counseling and advisory service for businesses
• Issuing certificate of origin, etc.
• Mainly counseling and advisory service for small businesses
Statutory Law CCI Act (1953) SCI Act (1960)
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2. “MARUKEI Loan” Program
Management CounselorCCI and SCI employ certified Management Counselors.
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.”
Since I keep close contact with managers of small businesses, I know well about their personality, business situations, human relationship and even their family.
When I am consulted on a financial matter, I sometimes recommend to apply for MARUKEI Loan.
• 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
<Must correspond to any of the following>
Mr. T, Management
Counselorof XXX SCI
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2. “MARUKEI Loan” Program
Procedure for the Loan
JFC-Micro
Analysis
Approval
Managementcounseling
(1) Application for recommendation
(2)
Recommendationand application for the loan
(4)
Recommendation letter, etc.(3)
CCI or SCI
(5) LoanSmall Businesses
Approval from the Chairman
Close Relationship
Assessment Committee
Management Counselor
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2. “MARUKEI Loan” Program
Results of the Loan
The latest results of the loan
Loans disbursed in FY 2009
Number 42,665
Amount 187,244 mil. yen (2.3 bil. USD)
<Average> 4,389,000 yen (542,000 USD)
Loans outstanding as of the end of March, 2010
Number 183,436
Amount 418,578 mil. yen (5.2 bil. USD)
Composition ratios by industry (Number of loans disbursed in FY 2009)
ManufacturingWholesale
Retail Service Construction Others
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2. “MARUKEI Loan” Program
Key Concept of MARUKEI LoanLinkage 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
MARUKEI Loan
CCI/SCI•Enhancing the effectiveness of the management counseling
Small Businesses•Getting no collateral/guarantor loan•Improving management
JFC-Micro•Alleviating the problem of information asymmetry
Management Counseling Linkage
Meeting, Seminar, Information exchange
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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.
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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.
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Appendix 1
Collaboration with Business Supporters
Licensed Tax Accountant
Management counseling
Technical support for entrepreneurs
Financial and managerial advice
MARUKEI Loan
Business Supporters JFC-Micro
Business Startup Loan
CCI
SCI
Close Relationship
General Loan
Special Loan
+
+
+
SME
SMRJ, Local Government
University, College
NPO
SMRJ: “Organization for Small and Medium Enterprises and Regional Innovation, Japan”
Environmental Health Trade Association
Managerial advice on EHB
EHB Loans+
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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.
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Thank you for your attention!
<E-mail> [email protected]
<Website> http://www.k.jfc.go.jp/pfce/indexe.html
Contact Us.
International Cooperation Office,
Japan Finance Corporation,
Micro Business and Individual Unit
(JFC-Micro)