Counseling and advisory Counseling and advisory services for improving services for improving the capacity and the the capacity and the capability of SMEscapability of SMEs
Presented by Naoyuki Yoshino Professor, Keio University, Japan, July 25, 2011 Video Presentation from Japan [email protected] 1
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Outline of Presentation
1, SME dominates Asian Economy2, SMEs are difficult to borrow money from Banks3, Heavy reliance on Micro-credit4, Book Keeping Data collection5, Financial Education6, Interest rate, Amount of sales
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Loan Supply CurveSME versus Large
Companies
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SME Loan Supply Curve
LargeCompanies
Interest Rate
Loan Supply
Lack of Data for SMEs
Largecorporations
SMEs
Banks
Micro Credit
CapitalMarket
Stocks and Bonds
CreditRating
Credit Guarantee
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Basel Capital Requirements
1, Adequate Capital for Banks2, To keep healthy3, SME loans will decline4, Micro credit 5, Loan sharks6, Education to SMEs and borrowers
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Keeping books by SMEs<Financial statements> (i) Cash & deposits (ii) Amount of Sales (iii) Inventories (iv) Buying price (v) Amount of goods laid in (vi) Various costs Equipment and Personal costs (vii) net profits
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How much interest rate
could SME pay ?1, Amount of loans / Net profits2, number of years to borrow3, expected growth rate of sales4, interest rate SME has to pay5, ratio of savings out of net profits
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)1....( 1 tttt LYCrL
tt cYC (c:marginal propensity to consume)
1)1( tt YaY (a: Expected growth rate of net sales)
y
y
p
p
Y
Ya
=(Rate of Inflation)+(Growth rate of real net sales)1
0L =Initial amount of borrowing
0Y =initial net sales
nL =Amount of loans at the end of n-th period.
1 Y=py(p;価格、y;実質所得)と表すことができるため。
Financial Planning for SMEs
(i) Education for SMEs(ii) Japan’s Government Bank provided consultation for SMEs(iii) Financial Education for individuals and SMEs Text book and Education training
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Bankers and Micro creditshave to provide honest
service to SME borrowers
Association of Micro credit companieswas established in 2009 in Japan.Education to money lenders (micro credit companies)Self regulations by the Association
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Four Accounts by SMEsWould SME disclose true
data ?
SMEs
Tax Authority
Banks
Showing to his wife
His Own
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SMEs(14.4million
data)
Defaults(1.7million
data)
Financial Institutions
200Regional Banks
Credit AssociationsCredit CooperativesGovernment Banks
Central Bank
Credit GuaranteeCorporations
(Collect Data of SMEs)52
1, Government Support2, Reliability
3, Security of InformationCRD
SME Data base
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Credit Rating System1, AAA, AA, BBB …………..
Single Number2, Various Characteristics needed to
be focused on: (i) Growth potential (ii) Good Management (iii) Technology etc.
3, Sudden Down-grading after Crisis
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Loan Supply CurveSME versus Large
Companies
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LargeCompanies
Interest RateOn Loans
Loan Supply
SME Loans
CRD (Credit Risk Database)Membership composition (Oct,2010)
Credit guarantee corporations 52 Government financial institutions 3 Private financial institutions 35 Credit-rating agencies, etc. 5 Small and Medium Enterprises Agency, Bank of Japan, etc. 5 Total 200 Annual fee=4 million (1st Year) 3 million yen (2nd yr)
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CRD Data: Since 1995
Corporations March-2010 Total 11,450,000 (1,887,000) Default data 1,368,000 (239,000)Individual owned company Total 2,920,000 (887,000) Default data 369,000 (369,000) Number of (Number of Accounts companies)
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Sectors (number of companies)
1, Construction 418,0002, Manufacturing 345,0003, Transport & communications 77,0004, Wholesale 245,0005, Retail 258,0006, Food & Restaurants 71,0007, Real estates 105,0008, Services 256,0009, Others 13,000
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Risk Based Interest Rate
(1) General Credit Risk(2) Credit Cost Ratio [Default ratio}x(1-recovery rate)
(3) Costs = Personal and Equipment
(4) Interest rate to raise money(5) Monitoring of SMEs by banks 25
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CRD Data CollectionCRD Data CollectionFinancial data – B/S and P/LNon-financial data -E.g. date of
establishment, geographical location
and Successor or notDefault data
3 months or more arrears; de facto bankruptcy; subrogation by credit guarantee
corporationspossible bankruptcy.
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ReferencesYoshino, Suzuki, Maehara and Abe
(2009) Development of Corporate Credit Information Database and Credit Guarantee System,
ASEAN Secretariat, Feb. 2009.Yoshino, N.(2010),OECD, Southeast Asian
Economic Outlook, Fall 2010, Chapter 6Yoshino, N., OECD-ADB, THE GLOBAL
IMBALANCE AND THE DEVELOPMENT OF CAPITAL FLOWS AMONG ASIAN COUNTRIES
March 17, 2011, OECD
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