1. 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
Taro MORITA
International Cooperation Office
JAPAN FINANCE CORPORATION
Micro Business and Individual Unit (JFC-Micro)

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

3. Establishment of Japan Finance Corporation
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
Okinawa Development Finance Corporation (ODFC)
(After 2012)
Agriculture, Forestry, Fisheries and Food Business Unit
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. Overview of JFC-Micro 1. Introduction of JFC-Micro
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.
History
Establishment of People’s Finance Corporation (PFC)
Reorganized into National Life Finance Corporation (NLFC)
Integrated into Japan Finance Corporation (JFC)
Organization
Stock corporation wholly owned by the Japanese government
Non-profitable policy-based financial institution
Regulatory body
Ministry of Finance, and other Ministries
Funding
Borrowing from the government, Government guaranteed bonds,
JFC Bonds
Size
Branch offices: Employees: approx. 4,700
Loans Outstanding
Business Loans to MSEs
6,531 billion yen (=80 billion USD)
Other Loans
961 billion yen

5. Characteristics of JFC-Micro Loan
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% , 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%)
(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. Comparison with Private Financial Institutions
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
1,084,043
25% of Japanese enterprises are JFC-Micro’s clients.
6.0 million yen
(74,000 USD)
Private banks
144
approx. 2,240,000
(15,555 per institution)
79.6 million yen
(980,000 USD)
City Banks and Regional Banks
Credit Associations
272
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)

7. Managerial Improvement Loan
1. Introduction of JFC-Micro
JFC-Micro’s Loan Programs
Ratio of Loans Outstanding in number (as of the end of Mar. 2010)
General Loan
This 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.
24.0%
53.0%
13.8%
9.3%

8. What’s MARUKEI Loan? 2. “MARUKEI Loan” Program
MARUKEI Loan was established in (“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. Target and Condition 2. “MARUKEI Loan” Program Target 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

10. “The Managerial Improvement and Dissemination Services”
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
Other operation
Other operation
“The Managerial Improvement and Dissemination Services”
MARUKEI Loan
Subsidy
Government
CCI
SCI
Small Businesses
Counseling by Management Counselors on finance, tax, accounting, labor, transaction, innovation, management, ICT, environmental measure, etc.

11. CCI and SCI 2. “MARUKEI Loan” Program
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)

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

14. <Average> 4,389,000 yen (542,000 USD)
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
183,436
418,578 mil. yen (5.2 bil. USD)
Composition ratios by industry (Number of loans disbursed in FY 2009)
Manufacturing
Wholesale
Retail
Service
Construction
Others

15. Management Counseling
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
Close Relationship
JFC-Micro
Fund for loan
Knowhow on lending (monitoring, etc.)
Meeting, Seminar, Information exchange
Management Counseling
Linkage
MARUKEI　Loan
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. Frequently Asked Questions (1)
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. Frequently Asked Questions (2)
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. Collaboration with Business Supporters
Appendix 1
Collaboration with Business Supporters
Business Supporters
Close Relationship
JFC-Micro
SME
CCI
SCI
Management counseling
MARUKEI Loan ＋
Environmental Health Trade Association
Managerial advice on EHB ＋
EHB Loans
SMRJ, Local Government
Technical support for entrepreneurs
Business Startup Loan
University, College ＋
NPO
Financial and managerial advice
Licensed Tax Accountant
General Loan ＋
Special Loan
SMRJ: “Organization for Small and Medium Enterprises and Regional Innovation, Japan”

19. JFC-Micro’s International Cooperation
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)
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