ADBI-Keio Executive

Training in Macroeconomics
3-7 November 2014
Conference Hall, North Building
Keio University, Mita Campus
Copy right @yoshino-Dean-ADB Institute

The views expressed in this presentation are the views of the author and do not necessarily reflect the
views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB),
its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the
data included in this paper and accepts no responsibility for any consequences of their use. Terminology
used may not necessarily be consistent with ADB official terms.

SME Finance
and
Hometown Investment Trust
Funds
Naoyuki Yoshino
Dean, Asian Development Bank Institute
(ADBI)
Professor Emeritus at Keio University, Japan

nyoshino@adbi.org
October 2014

Asian Development Bank Institute (ADBI) 2014

Conditions for Sustainable Grow th

1 P olitical stability and M acroeconom ic Stability
Sound m onetary& fiscal policy and ex change rate
2 Support equitable grow th, I ncom e equality
Housing P olicy, I nheritance tax
Savings are kept in abroad
3 CentralLocal governm ent relations and
Fiscal sustainability. Local governm ent bond
4 P rom ote com petitiveness and innovation
Financing for venture business and SM Es
Hom etow n I nvestm ent Trust Funds

5 P rotect the environm ent

and stable energy supply
6 Develop financial m arket
Financial I nclusion, financial regulation and
financial education (Access to finance)
7 Education and Healthcare

public school

8 Enhance seam less connectivity

I nfrastructure investm ent, free trade
9 I m prove governance issues, transparency

Characteristics of
Asian Financial Market
1, Bank-dominated financial system
2, Small share of bond markets
Needs for long term financing
3, Lack of long term investors such as
pension funds and insurance companies
4, High percentage of SME
5, Large share or Micro Credit (Finance
companies), Lack of venture capital
7

PopulationForecasts
Trends in Japan

Current
10 of Thousands Figures

14,000
12,000
10,000

(2012
current)

70.0
60.0
50.0

Age 65 and over

Age 15-64

8,000

40.0

6,000

30.0

4,000

20.0

Employment to
Population Ratio

2,000

10.0

Current Birth
Ratio

0.0

Age 14 and less

Aged to
Population Ratio

Source: Ministry
Internal Affairs a
Communication
9

10

Japanese Debt, 92% are held by

Domestic Investors
HOLDERS

Banks and Postal Savings

Life and Non-life Insurances
Public Pension funds
Private Pension Funds
Central Bank of Japan
Overseas Investors
Households
Others

45%
20%
10%
4%
8%
8%
5%
3%

11

Source: MOF

Greece, 80% of their debts are held

by overseas Investors (2011)
HOLDERS

Eurozone
ECB
IMF
Greek banks & non-banks
Other European Banks
Non European Banks
Non-Greek non-Banks

15%
15%
6%
23%
10%
8%
23%
12

SourceFinancial Tim

January-13

January-12

January-11

January-10

January-09

January-08

January-07

January-06

January-05

January-04

January-03

January-02

January-01

January-00

Japanese Government Bond Yields

2.5

1.5

0.5
5-year
10-year

Source: M

Japans Supply and Demand for

Bonds

14

Government long-term bond yield

Eurozone 5-year CDS

Greece Supply and Demand

for Government bonds

17

Changes in Japans Money Flow

High Growth Period

Households Savings Corporate Capital
Investment
Stock

Recent Period
Corporate Savings Government Elderly people

Abolish Retirement Age

Increase working population
Pension payment will start 65 or later
Wage rate be based on marginal productivity
18

Vertical IS curve is Japans problem

Yoshino and Sakakibara (2002)
Current State of Japanese Economy
Asian Economic papers, MIT Press

19

Where do Asian savings go?

20

21

Bank-Dominated Financial Systems and the

Economic Importance of SME

22

23

24

25

27

3. SME database and stable

finance
SME database
Database provided by the credit

risk database
Hometown Investment trust funds
Long-term finance in Asia
How to develop Long-term investors in

developing economies

28

Borrower, Lender and Market

Borrower
SMEs
Individuals

Market

Lender
Banks
MicroCredit

Information Asymmetry
Especially SME market

29

30

Hometown investment trust funds

31

4. Analysis of SME credit risk

using Asian data
Selection of the variables
Principal Component Analysis
Cluster Analysis

32

33

Principal component analysis

34

35

36

37

Cluster analysis: the average linkage method

38

39

Credit Rating of SMEs

by Use of Asian Data
(i) Sales
(ii) Assets
(iii) Liquidity (Cash)
(iv) Total Debt
40

41

Z1-Z2
Group A-2

Z1-Z2
Group A-1

3
2.5

1.5

Z1-Z2
Group B

2
1

1.5

0.6

0.5

0.4

0.5

0.2
-4

-2

-0.2
-0.4

0
0

-2

-1

2 -1

-0.5

-0.6
-0.8
-1
-1.2
-1.4
-1.6

-1

Healthier Group
of SMEs
42

43

Bank based SME financing and

Regional financing to Riskier Borrowers

1, Bank Loans to relatively safer borrower

2, Hometown Investment Trust Funds/

E-Finance, Internet financing

Safer
SMEs
Riskier
Borrowers

Banking
Banking
Account
Account
Hometown
Investment

Trust
Funds

Depositors

Investors

45

YoshinoKeioUniversity @CopyRight

46

47

Donation and Investment to

community

48

Two Types of Investors

Community Type Infrastructure

Hometown Investment Trust Funds
Wind power Generator Funds
Japanese Wine Fund
Local Airport
Agricultural Sector

Large Projects and Professional Investors

Pension Funds
Insurance companies
Mutual Funds

Brown fields
not green field

Reference, Cargill and YOSHINO Postal Savings and

Fiscal Investment in Japan ford University
49
Press

Naoyuki Yoshino
Naoyuki Yoshino is Dean of the Asian Development Bank Institute (ADBI),
Senior Advisor at the Japan Financial Services Agencys (FSA) Financial
Research Center (FSA Institute), and Professor Emeritus of Keio University,
Tokyo, Japan. He obtained his PhD from Johns Hopkins University in 1979.
Dr. Yoshino was a visiting scholar at the Massachusetts Institute of
Technology (United States) and has been a visiting professor at various
universities including the University of New South Wales (Australia),
Fondation Nationale des Sciences Politiques (France), and University of
Gothenburg (Sweden). He was an assistant professor at the State University
of New York at Buffalo and an economics professor at Keio University since
1991. He was appointed Chair of the Financial Planning Standards Board in
2007, and also served as Chairperson of the Japanese Ministry of Finances
Council on Foreign Exchange and its Fiscal System Council (Fiscal
Investment and Loan Program Section), and was also a Board Member of the
Deposit Insurance Corporation of Japan, Chairperson of the Meeting of
Japanese Government Bond Investors (Ministry of Finance), and President
of the Financial System Council of the Government of Japan. Dr. Yoshino
was conferred honorary doctorates by the University of Gothenburg
(Sweden) in 2004 and by Martin Luther University of Halle-Wittenberg
(Germany) in 2013, and also received the Fukuzawa Award for his
contribution to academic research in 2013.