1. Monetary Policies

  2. Business Upgrading Loan

Difficulty in procuring funds is one of the greatest managerial issues for SMEs, which are in most cases unattractive loan recipients for private financial institutions. Therefore, there were not enough suppliers that could provide funds to SMEs. Thus, financial institutions that can provide a stable supply of fixed long-term and low-interest funds to SMEs regardless of fluctuations in the economy, in the form of governmental SME financial institutions, were needed. The Japan Finance Corporation for Small Business, the National Life Finance Corporation, and the Shoko Chukin Bank, etc. were created and have been meeting these needs.

In accordance with policy needs at different times, governmental SME financial institutions also have a role in achieving policy stimulating effects in fields to which the market mechanism will not apply, by extending special loans for the fund needs that meet the purport of the policy, with advantageous conditions such as reduced interest rates and a flexible demand for collateral and guarantee.

(1) Roles of the three governmental SME financial institutions

(Note: Both capital and loan balance are as of the end of March 2001.)

a)Japan Finance Corporation for Small Business

A financial institution established in 1953 under the Small Business Finance Corporation Law for the purpose of supplying to SMEs fixed, long-term, and low-interest funds, which are long-term funds needed for promotion of SMEs' projects, but which general private institutions have difficulty in supplying.
[Capital: ¥ 410.9 billion (wholly invested by the Government); Outstanding loans: ¥ 7,619.2 billion]

b)National Life Finance Corporation

A financial institution established in 1949 under the National Life Finance Corporation Law for the purpose of mainly supplying short-term, small lot funds without collateral to small-scale enterprises.
[Capital: ¥ 321.9 billion (wholly invested by the Government); Outstanding loans: ¥ 10,861.7 billion]

c)Shoko Chukin Bank

A financial institution established in 1936 under the Shoko Chukin Bank Law for the purpose of soliciting investment in the Bank from SME associations as well as from the Government, and providing general financial services to said associations and their members.
[Capital: ¥ 493.9 billion (¥ 394.0 billion invested by the Government); Outstanding loans: ¥ 10,886.5 billion]

(2) Role of the Credit Supplementation System

The credit guarantee system aims to supplement insufficiency in credit and security of SMEs and facilitate fund supply through the guarantee of loan debts by Credit Guarantee Corporations for SMEs that have difficulty in borrowing funds, due to insufficient credit or security and payment in subrogation to financial institutions in the event of default of the said Corporations guarantee. Moreover, the Japan Small and Medium Enterprise Corporation (JASMEC) supplements the risk in Credit Guarantee Corporations throughout the country through re-insurance.

a)Credit Guarantee Corporations

Credit Guarantee Corporations, a total of 52 independent offices throughout Japan, have been established as certified corporations under the Credit Guarantee Association Law (1953) for the purpose of smoothing finance for SMEs by guaranteeing their borrowings from financial institutions.
[Outstanding guarantee of liability: ¥ 41,174.6 billion (as of the end of March 2001)]

b)Japan Small and Medium Enterprise Corporation (JASMEC) (Credit Insurance Department)

JASMEC was established in 1958 under the Small Business Credit Insurance Law for the purpose of insuring the debt guarantee by Credit Guarantee Corporations and lending them the funds necessary for operation. JASMEC re-insures a maximum of 80 percent of the debt guarantee by Credit Guarantee Corporations.
[Contracted amount for underwritten insurance for FY2000: ¥ 18,051.3 billion]

[Ref 1] Shares of Government-Supported Loans in SME Finance

- Total Outstanding Loans to SMEs (as of the end of March 2001)

(Unit: trillion yen)

Business Category Name Total Outstanding Loans to SMEs (percentage) Private Financial Institution City Banks 102.7 (32.4%) Main Regional Banks 75.6 (23.8%) Secondary Regional Banks 28.9 (9.1%) Trust Banks and Long-Term Credit Banks 25.0 (7.9%) Shinkin Banks 45.9 (14.5%) Credit Cooperatives 10.7 (3.4%) [Sub-Totals] 288.7 (91.1%) Governmental Financial Institution Japan Finance Corporation for Small Business (Note) 7.5 (2.4%) National Life Finance Corporation (Note) 9.8 (3.1%) Shoko Chukin Bank 10.9 (3.4%) [Sub-Totals] 28.2 (8.9%) Grand Total 316.9 (100.0%)

Note: Only the loans to SMEs (except loans to support institutions, individuals, etc.)

- Outstanding Guarantee Liabilities to SMEs (by Credit Guarantee Corporations, as of the end of March 2001) : ¥ 41.2 trillion

[Ref 2] Scheme Chart of the Credit Supplementation System for SMEs