JFC-Micro Outline and International Cooperation JAPAN FINANCE CORPORATION. Micro Business and Individual Unit

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1 JFC-Micro 2011 Outline and International Cooperation JAPAN FINANCE CORPORATION Micro Business and Individual Unit

2 JFC-Micro, assisting in the development of Micro JFC-Micro's response to the disaster Japan Finance Corporation, Micro Business and Individual Unit (JFC-Micro) extends deepest condolences to all those affected by the Great East Japan Earthquake of March 11, As a policy-based financial institution, JFC-Micro has set up a special consultation desk in the wake of the disaster, and provides detailed assistance for MSEs negatively impacted by the disaster. Japan Finance Corporation, Micro Business and Individual Unit (JFC-Micro) is one of the units of JFC, which is a comprehensive policybased financial institution wholly owned by the Japanese government. JFC-Micro mainly aims at supporting Micro and Small Enterprises(MSEs) in Japan. Financial Support for Micro and Small Enterprises Page 03 The most important mission of JFC-Micro is to give financial support for MSEs, which have difficulty in obtaining enough funds from the private sector due to micro and small business size, small fund demand, insufficient collateral, etc. Since its original establishment in 1949, JFC-Micro has provided various kinds of business loans to MSEs in almost all industries in Japan. Profile of JFC-Micro (As of March, 31, 2011) Graduates from JFC-Micro Original Establishment June 1949 Even today's major worldwide enterprises were just small Branches 152 companies with only a few employees when they started their businesses. Companies such as SONY, KYOCERA, MIKIHOUSE Business Loans Outstanding 6,541 billion received financial support from JFC-Micro at their initial stage. Number of Borrowers 1.03 million As a result, they achieved rapid growth and became leading enterprises. We can say that they are Graduates from JFC-Micro. Encouragement of Business Start-ups Page 04 In many cases, it is not easy for business start-ups to get funds from private financial institutions because of a lack of past performance and insufficient collateral. As a policy-based financial institution, JFC-Micro has been making as many loans as possible to business start-ups. Under these unique circumstance, JFC-Micro has offered several programs and schemes. Variety of Business Loans Page As MSEs have diverse needs that vary depending on the situations, JFC-Micro offers various kinds of business loans. JFC-Micro takes important role as a Safety-net for those being affected by unexpected change in economic circumstance, such as global financial crisis and bankruptcy of large enterprise. For those having difficulties in providing collateral and guarantors, JFC-Micro offers Managerial Improvement Loans, which do not require any collateral or guarantors, under a collaboration with local Chambers/Societies of Commerce and Industry. 01 JFC-Micro Outline and International Cooperation 2011

3 and Small Enterprises(MSEs) Complementing Private Sector in the Field of SME Finance JFC-Micro has complemented private financial sector by supplying stable funds to MSEs regardless of change of economic and financial environments. (%) JFC-Micro Domestic licensed banks Financial Instability Source: Bank of Japan, Financial Service Agency, JFC Notes: 1. Domestic banks refer to commercial banks, regional banks, trust banks, credit assosiations, and credit unions. 2. Excluding yen loan to overseas, loans for local government, and personal loans (housing, consuming,etc.) as for commercial regional banks, credit assotiations. 3. The definision of "SME" was changed in April 2000: the data for March 2000 and June 2000 are inconsecutive. 4. Including overdraft account from March 1994 for commercial banks, regional banks and trust banks, and from March 1995 for creidt associations Lehman Brothers Shock (Year) International Cooperation Page In most developing countries, promotion of MSEs is considered to be one of the key policies for economic growth, job creation and poverty reduction. However, it is not always easy for MSEs to access financial resources due to insufficiency of collateral and financial data. Under these circumstances, JFC-Micro has been providing its accumulated experience and expertise on MSE Finance to foreign financial institutions. Financial Status and Funding Sources Page JFC-Micro obtains funds through various sources. These include borrowings from the fiscal loan funds, governmentguaranteed bonds, FILP agency bonds and capital contributions from the government. Headquarters and Branch Network Page 13 JFC-Micro has a nationwide network to meet various needs of regional MSEs. JFC-Micro provides its services through 152 branch offices throughout Japan. In addition, JFC-Micro established Business Start-up Support Centers and Business Support Plazas in major branch offices to support the business start-ups. Other Loans for Supporting the Lives of People In addition to business loans to MSEs, JFC-Micro provides other types of loans, which support a wide range of individuals. Educational Loans JFC-Micro began extending loans to cover education-related expenses in 1979, as families struggled to meet the increasingly high cost of putting children through high school, colleges and universities. In fiscal year 2010, the total amount of disbursed loans was 174 billion. Loans Secured by Pensions JFC-Micro is the only organization in Japan which is authorized to make loans secured by pensions. JFC-Micro Outline and International Cooperation

4 Financial Support for Micro and Small Enterprises As a policy-based financial institution, JFC-Micro has been providing business loans since its establishment in 1949 to a very large number of MSEs, which experienced challenges in getting fund from the private sector. This is why JFC-Micro Loans and its borrowers have a number of distinct characteristics. Comparison with Other Financial Institutions JFC-Micro (only) Credit Associations (271 orgs.) Banks (144 orgs.) Number of Borrowers 1.03 million 1.18 million 2.16 million Loan Outstanding per Customer 6.34 million million million Notes : 1. The number of Credit Associations and Banks do not include housing loans and loans for local municipal entities. 2. The total number of companies in Japan is about 4.20 million. Source : Bank of Japan Borrowers Large number of MSEs in almost all industries Loans Small amount, mid-term loans with no collateral Number of Employees (FY2010) About 90% of them are the companies with less than 10 employees Loan Amount (FY2010) About 50% of them are less than 5 million 5-8 million (14.0%) 4 or less (65.9%) (8.6%) 5-9 (21.1%) Less than 3 million (33.1%) 3-5 million(19.3%) 8 million or more (33.6%) 20 or more (4.4%) Types of Borrowers (FY2010) About 40% of them are Individuals Payment Period (FY2010) About 80% of them have 3-7 year repayment period Individuals (42.6%) Corporations (Paid-in capital of less than 10 million) (50.0%) Corporations(Paid-in capital of 10 million or more) (7.4%) months(83.0%) months (10.2%) Industries (At the end of FY 2010) Almost all industries are covered Wholesale, Retail (24.3%) Services (21.6%) Business History (FY2010) Wide variety of business history Restaurants/Hotels (8.7%) Construction (15.7%) Manufacturing (12.2%) Others (17.5%) Less than 36 months (5.9%) more than 120 months (0.9%) Collateral (FY2010) About 80% of them have no collateral About 30% of them have no collateral, no guarantors Collateral (real property or others) (23.0%) No collateral(77.0%) No collateral, No guarantor (27.8%) Partially covered (15.3%) less than10 years (24.8%) years (19.0%) years (16.6%) 50 or more years (14.5%) years (14.9%) years (10.2%) 03 JFC-Micro Outline and International Cooperation 2011

5 Encouragement of Business Start-ups Business start-ups play a very important role in terms of creation of new businesses, promotion of competition and creation of job opportunities. However, in general, business start-ups find it difficult to get funds from the private sector, due to a lack of past performance, collateral, etc. Therefore, as a policy-based financial institution, JFC-Micro has been actively supporting business start-ups. JFC-Micro's Support JFC-Micro supports business start-ups through loans and services. This includes consultations on business by utilizing a wide network of 152 branches, Business Support Plazas in Tokyo, Nagoya and Osaka, and Business Start-up Support Centers located at 15 major branch offices throughout Japan. The number of business start-ups supported by JFC-Micro amounted to 18,125* in fiscal year It is estimated that 79,750 job opportunities were created. 18,125* business start-ups 4.4 = employees (JFC s research) 79,750 job opportunities * A total of businesses before start-up and within one year after start-up. Encouraging Fund from Private Financial Institutions (PFIs) JFC Research Institute conducted the Panel Survey on Business Start-ups with customers who utilized JFC-Micro's business start-up loans when they started their businesses. According to the survey, the ratio of enterprises that utilize loans from private financial institutions is increasing; from 10.9% at the establishment (2005) to 35.0% at the end of It can be said that enterprises have grown through JFC-Micro s business startup loans, and they have obtained those loans from PFIs. [Ratio of the Enterprises Borrowing from PFIs] At the time of the establishment (2005) Support for Women, Youth and Senior Entrepreneurs In order to support these entrepreneurs, JFC-Micro established Women, Youth and Senior Entrepreneurs fund. [Number* of Business Start-ups under the " Women, Youth and Senior Entrepreneurs fund " ] (FY2010) For women For people aged under 30 For people aged 55 and over 3,589 1,581 1,938 * A total of businesses before start-up and within five years after start-up. Supporting Social Businesses JFC-Micro supports social businesses that address a social objective and contribute to stable and continuous job creation. Almost half of the businesses are enterprises with less than 5 years from the establishment. JFC-Micro also supports Nonprofit Organizations (NPOs) that undertake social businesses. The number of loans for them is increasing from year to year. [Type of Business History (at the time of extending JFC-Micro loans) ] (from Apr.2010 to Dec.2010) Before the establishment 9.1% More than 5 years after the establishment 50.5% Within 5 years from the establishment 40.4% [Number of Loans for NPOs] FY2008 FY2009 FY2010 JFC-Micro Outline and International Cooperation

6 Variety of Business Loans In order to meet diverse needs of MSEs, JFC-Micro provides four types of business loans, which are : 1. General Loans, 2.Special Loans, 3. Managerial Improvement Loans (MARUKEI Loans) and 4. Environmental Health Business Loans JFC-Micro offers various types of loans not included in this section. Conditions in this section are as of June General Loans General Loans have been utilized by MSEs in almost all industries since JFC-Micro's establishment. Maximum amount : up to 48 million ( 72 million for specified equipment fund) 2. Special Loans Special Loans have been set up based on specific policy objectives, such as helping MSEs restructure and update their businesses. Business Start-ups Loans and Safety-net Loans are included in this category. Maximum amount : up to 72 million (up to 48 million for working fund) 3. Managerial Improvement Loans (MARUKEI Loans) No collateral or guarantor MARUKEI Loans have been utilized by MSEs that have received managerial advice and recommendations from heads of local Chambers/Societies of Commerce and Industry. Based on a formal recommendation from local Chambers of Commerce and Industry (CCI) or Societies of Commerce and Industry (SCI), JFC-Micro provides the loans without collateral or guarantor. This loan program aims at promoting managerial improvement of MSEs, together with managerial advice from CCIs or SCIs, from financial aspect. Close collaboration between CCIs/SCIs and JFC-Micro makes it possible to provide these no-collateral and no-guarantor loans. Maximum amount: 15 million Loan Procedure Chambers/Societies of Commerce and Industry (CCI/SCI) 4. Recommendation for Loan Assessment Committee 3. Evaluation Report Management Counselors JFC-Micro 1. Managerial Advice 2. Application 5. Loan Customers Requirements in Applying for Recommendation from CCI/SCI 1. Having less than a certain number of employees (for manufacturing, 20 or less) 2. Having paid their taxes in full 3. Having been in business in same area for more than one year 4. Having received business consultation from CCI/SCI for more than six months (in principle) 05 JFC-Micro Outline and International Cooperation 2011

7 4. Environmental Health Business (EHB) Loans Environmental Health Business Loans are designed to improve public hygiene and sanitation level of restaurants, barbershops, beauty salons and laundries. Maximum amount: between 72 and 400 million (for equipment funds) Number of Loans Outstanding (At the end of FY 2010) Environmental Health Business Loans 109,362(8.7%) MARUKEI Loans 165,614(13.1%) Total 1,260,774 (100%) Special Loans 765,045(60.7%) General Loans 220,753(17.5%) Amount of Loans Outstanding (At the end of FY 2010) (Billions of yen) Environmental Health Business Loans 442(6.8%) MARUKEI Loans 394(6.0%) Total 6,541 (100%) Special Loans 4,730(72.3%) General Loans 973(14.9%) Number of Loans Disbursed in FY 2010 Environmental Health Business Loans 12,081(3.8%) MARUKEI Loans 37,654(11.8%) Total 318,341 (100%) Special Loans 263,590(82.8%) General Loans 5,016(1.6%) Amount of Loans Disbursed in FY 2010 (Billions of yen) Environmental Health Business Loans 62(2.4%) MARUKEI Loans 147(5.6%) Total 2,605 (100%) Special Loans 2,358(90.5%) General Loans 36(1.4%) Role as a Safety-net targeted to recover from natural disaster In the wake of natural disaster, JFC-Micro sets up special consultation desks, and provides detailed assistance such as re-scheduling loans, and providing Disaster Loans that have longer repayment period and grace period than other types of loans. JFC-Micro's response to the Great East Japan Earthquake of March 11, 2011 After the Great East Japan Earthquake of March 11, 2011, JFC-Micro has established The Great East Japan Earthquake Recovery Special Loans to assist MSEs negatively impacted by the disaster. Available for (1) SMEs affected directly by the disaster or Nuclear Power Station Incident (2) SMEs affected indirectly by the disaster or Nuclear Power Station Incident (3) Other SMEs affected by the disaster, such as planned blackouts and harmful rumors. Maximum amount 60 million (Extra amount) 48million (Extra amount) Repayment period Working fund: Up to 15 years Equipment fund: Up to 20 years (Grace period 5 years) Working fund: Up to 15 years Equipment fund: Up to 15 years (Grace period 3 years) Working fund: Up to 8 years Equipment fund: Up to 15 years (Grace period 3 years) Regular Interest rate Regular Interest rate Interest rates For SMEs damaged by the disaster that received Disaster Victim Certificate from the local governments, etc. a discount rate will be applied. For SMEs that meet certain conditions, a discount rate will be applied. * JFC-Micro offers a special support program in addition to the ordinary financial framework of Educational Loans for those affected by the disaster that received Disaster Victim Certificate from the local governments. JFC-Micro Outline and International Cooperation

8 International Cooperation In recent years, more and more developing countries have recognized the importance of promoting MSEs to achieve sustainable economic growth. Particularly, in respect of poverty reduction and job creation, enhancing MSE Finance is considered as one of the essential economic policies for these countries. In order to transfer experience and expertise on MSE Finance, JFC-Micro established the International Cooperation Office (ICO) in March ICO has contributed to international cooperation through the following three types of activities : 1. Long-term Technical Assistance Project, 2. International Seminars and Conferences, 3. Acceptance of Foreign Missions. 1 Long-term Technical Assistance Project Project for Vietnam Bank for Social Policies(VBSP) In order to reduce poverty in Vietnam, VBSP started its policy-based lending in However, at the beginning, most employees did not have experience regarding credit analysis for MSEs. JFC-Micro has provided VBSP with its know-how since then as an ODA project by Policy Research Institute (PRI), Ministry of Finance (MOF), Japan. Outline of VBSP (as of December 2010) Organization: Government financial institution Objective: Offering funds for the poor and small businesses Branch Offices: 63 branch offices and 618 transaction offices Employees: 8,800 Outstanding Loans: VND 89,461 (approximately US$ 4,331 million) JFC-Micro s Activities for VBSP - Phase 1( ) : Improvement of VBSP Staff's Ability In order to enhance the VBSP staff s ability regarding credit analysis, JFC-Micro provided its techniques through lectures, case studies and discussions in Vietnam and in Japan. In addition, JFC-Micro supported the creation of Credit Analysis Materials as an outcome of Phase 1. - Phase2 ( ) : Dissemination of Credit Analysis Materials JFC-Micro conducted seminars that delivered the contents of Credit Analysis Materials to as many VBSP staff as possible and expanded upon how to use the materials effectively. - Phase3 (2009- ) : Establishment of an Independent Training Course on Credit Analysis In the Phase 1 and 2, JFC-Micro provided its know-how regarding credit analysis for MSEs. At the same time, the number of staff at VBSP sharply increased and they established Training Center (TC) in order to develop their abilities. However, TC staff do not have enough experience and know-how regarding credit analysis. In this phase, JFC-Micro is supposed to support training instructors and develop training materials. Two seminars in Vietnam and one seminar in Japan were carried out, and TC staff have steadily obtained the necessary know-how. TC staff will conduct a training course for its staff regarding credit analysis methods for MSEs around October JFC-Micro Outline and International Cooperation 2011

9 Project for SME Bank, Malaysia SME Bank was established in 2005 under a policy of Malaysian government, and has been required to meet a strong demand for funds from small and medium enterprises, especially from MSEs and business start-ups more promptly. In order to support SME Bank in dealing with the situation, JFC-Micro has been cooperating with them regarding the improvement of their credit analysis methods since Dec. 2008, as an ODA project of PRI, MOF, Japan. Outline of SME Bank, Malaysia (as of December 2010) Organization: Government-owned development financial institution Objective: Offering financial and business advisory services and credit guarantee for SMEs Branch Offices: 19 Employees: 995 Outstanding Loans: RM 3.97 billion (approximately US$ 1,299 million) JFC-Micro s Activities for SME Bank -Signing Ceremony and 1st Seminar in KL (Dec. 2008) JFC-Micro and PRI signed the RD to start the project, and JFC-Micro conducted a seminar to explain its credit analysis through lectures and discussions. -2nd Seminar in Tokyo (Jan. 2010) JFC-Micro accepted seven representatives from SME Bank for a five-day seminar in Japan. -Final Evaluation and Closing Ceremony (Jun. 2011) Representatives of JFC-Micro and PRI visited KL for a final evaluation of the project. JFC-Micro and PRI confirmed the output of the project and found that the project effectively contributed to an improvement in their credit analysis method. The project concluded with a closing ceremony. New project has just started - Technical Cooperation for LDB - As an ODA project of PRI, MOF, Japan, Technical Cooperation for Lao Development Bank (LDB) has been launched in June, The main objectives of this project are to support human resource development and to improve loan operations to MSEs. JFC- Micro has proactively involved in this project and hopes to be of some help to foster growth of MSEs in Laos. JFC-Micro Outline and International Cooperation

10 International Cooperation 2 International Seminars and Conferences JFC-Micro dispatches its staff to international seminars/ conferences related to MSE finance hosted by international organizations and foreign institutions. In these events, JFC-Micro staff provides information about Japanese experience in the field of MSE finance through lectures or presentations. For instance, two JFC-Micro staff were invited as JICA experts to Training Program on Credit Analysis for SME in Indonesia in January, participants from central bank, local governments and regional development banks attended the seminar, and JFC-Micro staff gave lectures on policybased finance, credit analysis and business start-up support. Annual Meeting of APEC Financial Institutions Dealing with SMEs JFC has been a member of Memorandum of Understanding (MOU) by Asia - Pacific Economic Cooperation (APEC) Financial Institutions Dealing with SMEs since The signatory members consist of 13 financial institutions from 11 economies in the APEC region. An annual meeting of the members is held every year, and its results are reported to the APEC Finance Minister s Meeting. In 2010, JFC-Micro and JFC Small and Medium Enterprise (SME) Unit sent a joint delegation to the 7th meeting in Kuala Lumpur. 3 Acceptance of Foreign Missions JFC-Micro regularly accepts missions (trainees, study groups, and dignitaries) from various countries every year. On such occasions, JFC-Micro gives lectures on MSE finance in Japan, roles and functions of JFC-Micro. In fiscal year 2010, JFC-Micro accepted 22 foreign missions. More than half of them are part of training programs conducted by JICA. Financial Gap in SME Finance In developing countries, there have been two types of financial systems for SMEs. One is Traditional SME Finance, which is conducted by commercial banks for SMEs with relatively solid bottom line and sufficient financial data. The other is Micro Finance which is for low-income groups and micro enterprises. Between these two financial systems, we can see a financial gap. Enterprises in the gap are mainly MSEs. They have difficulty in raising funds from commercial banks because they do not have enough assets for collateral and lack appropriate financial data. Meanwhile, they are not satisfied with loans from microfinance institutions because the loan amounts are not enough. We think a new type of financial system, called MSE Finance, can cover the gap and that JFC-Micro loans are positioned as MSE-Finance. Micro Finance Low Income groups, Micro Enterprises Financial Gap MSE Finance MSEs JFC-Micro Loans Traditional SME Finance Highly-performing SMEs 09 JFC-Micro Outline and International Cooperation 2011

11 International Cooperation Activities in FY 2010 Long-term Technical Assistance Projects Date(s) Activities Counterpart Location October Interim Evaluation of Technical Cooperation Project Vietnam Bank for Social Policies Vietnam December Meeting on Project Implementation SME Bank, Malaysia Malaysia March 9-18 Preliminary Survey on Technical Cooperation Lao Development Bank Laos International Conferences Date(s) Activities Location May VietinBank - JFC-Micro, Study Session on SME Finance Vietnam July Seventh Annual Meeting of APEC Financial Institutions Dealing with SMEs Malaysia November 17 Meeting with Mr. Yuthasak, Director General, Office of SME Promotion Thailand November 18 ADFIAP International CEO Forum VII Cambodia January Institute for International Studies and Training (IIST) SME Finance Seminars Vietnam, Cambodia January 25 - February 4 JICA Training Program on Credit Analysis for MSEs Indonesia Acceptance of Foreign Missions Date(s) Missions April 20 Meeting with Acting Chairman, The State Property Committee of The Republic of Uzbekistan May 14 Accepting Study Group from National Credit Union Federation of Korea, etc. June 8 JICA Financial and Technological Support for Small and Medium Enterprises Promotion (A) June APRACA-CENTRAB International Study Visit Program on MSE Finance, the Japanese Way June 24 Accepting the Study Group from Federal Democratic Republic of Ethiopia June JICA The Policy of Regional Industry Promotion for South East European Countries August 12 PRI The Summer Seminar for Central Asian and Caucasian Countries 2010 September 6 JICA Seminar for Food Safety Policy Making and Management September 10 JICA Financial and Technological Support for Small and Medium Enterprises Promotion (B) October 7 JICA Training course on Small and Medium Enterprise Development Policies (A) November 2 JICA Training Program for Young Leaders for Malaysia /Administrative Management Course November 11 JICA Training Course on Credit Guarantee System in Japan November 30 - December 1 JICA Small & Medium Enterprise Development Policies for Central and South America December 6 JICA Economic Administration (Industrial Development and Promotion) December 8 JICA Project on Human Resource Development for SME Corporation Malaysia January 6 Mission from Kuwait University January 24 JICA Training course on Small and Medium Enterprise Development Policies (B) February 17 APRACA-CENTRAB Study Visit Program in Japan 2011 February JICA Reinforcement of Micro, Small and Medium Enterprise Supporting Organization for African Countries March 3 JICA Trainig course on Small and Medium Enterprise Development Policies (C) March 4 Mission from VietinBank March 7 JICA Necessary Policy Measures and Reform Strategies for Financial System Stability in NIS Countries JFC-Micro Outline and International Cooperation

12 Financial Status and Funding Sources Balance Sheet (As of March 31, 2011) Assets Liabilities (Millions of yen) Cash and due from banks 55,773 Loans and bills discounted 7,162,022 Other assets 17,381 Property, plant and equipment 105,133 Intangible assets 4,544 Allowance for loan losses 145,514 Borrowed money 5,843,032 Bonds payable 989,602 Other liabilities 19,404 Provision for bonuses 2,972 Provision for directors bonuses 6 Provision for retirement benefits 121,696 Provision for director s retirement benefits 33 Total liabilities 6,976,748 Net assets Capital stock 637,848 Capital surplus 181,500 Retained earnings 596,757 Total net assets 222,590 Total assets 7,199,339 Total liabilities and net assets 7,199,339 Funding Sources Money Flow Bond Issue NTT, JT, etc. Special Account Surplus Reserve, etc. Financial Market Stock Dividends, etc. Deposit FILP Bonds Government General Account FILP Special Account FILP Special Account (Fiscal Loan Fund) FILP Equity Contribution Investment Loan Loan Governmentguaranteed Bonds JFC-Micro JFC-Micro Bonds FILP Fiscal Investment and Loan Program 11 JFC-Micro Outline and International Cooperation 2011

13 Income Statement (From April 1, 2010 to March 31, 2011) (Millions of yen) FY 2010 Ordinary income Interest income 152,501 Fees and commissions 87 Receipts from the national budget 8,686 Other income 712 Total ordinary income 161,987 Ordinary expenses Interest expenses 51,630 Fees and commissions payments 960 Other ordinary expenses 349 General and administrative expenses 69,790 Other expenses 88,127 Provision of allowance for loan lossess 82,653 Written-off of loans 5,474 Other 0 Total ordinary expenses 210,859 Ordinary loss 48,871 Extraordinary income 104 Extraordinary losses 6,081 Net loss 54,848 Information on Non-performing Loans of JFC-Micro (Billions of yen) Loans to bankrupt parties (A) 35.3 ( 0.5%) Loans to likely bankrupt parties (B) ( 1.9%) Loans overdue for three months or more (C) 0.1 ( 0.0%) Restructured loans (D) ( 8.0%) Total (10.4%) Note: Figures in parentheses denote percentage against total loans outstanding. Items are defined as follows: (A): Loans to borrowers classified by self-assessment as bankrupt parties. (B): Loans to borrowers classified by self-assessment as parties likely to go bankrupt. (C): Loans whose principal or interest is overdue for more than 3 months, as accounted from the day after the due date, not including loans to bankrupt parties (A) and loans to likely bankrupt parties (B). (D): Loans whose repayment conditions have been modified to accommodate each borrower s situation, such as postponement of payment of principal and/or interest, but not including loans classified under categories (A), (B) and (C). However, if the loans are guaranteed in full by real estate collateral, they are not included in this category of restructured loans because the credit risk is judged to be low. JFC-Micro Outline and International Cooperation

14 Headquarters and Branch Network Organizational Chart of Headquarters JFC-Micro (Micro Business and Individual Unit) Loan Sub-Unit Loan Department Branch Support Office Agriculture, Forestry, Fisheries and Food Business Unit Small and Medium Enterprise (SME) Unit Japan Bank for International Cooperation (JBIC) Operational to Facilitate Crisis Response Environmental Health Business Loan Sub-Unit Credit Sub-Unit Planning & Administration Sub-Unit Business Start-up Support Department Environmental Health Business Loan Department Environmental Health Business Loan Operation Department Credit Department Planning & Management Department Budget Administration Office General Administration Department International Cooperation Office Human Resource Development Department Risk Management Department Mitaka Information System Center *JFC-Micro is one of the units of JFC. The above chart shows the organization of JFC-Micro. Branch Network We have 152 branches throughout Japan (excluding Okinawa). Business Start-up Support Centers (15) (Hokkaido, Sendai, Saitama, Tokyo, Tama, Minami-Kanto, Hokuriku, Nagoya, Kyoto, Kobe, Osaka, Hiroshima, Takamatsu, Fukuoka, Kumamoto) Sapporo (2 branches) Business Support Plazas (3) (Tokyo, Nagoya, Osaka) Fukuoka (2 branches) Kitakyushu (2 branches) Kyoto (2 branches) Saitama (2 branches) Kobe (2 branches) Osaka Pref. (11 branches) Nagoya (3 branches) Yokohama (2 branches) Tokyo Metropolis (14 branches) 13 JFC-Micro Outline and International Cooperation 2011

15 Contact Us International Cooperation Office (in Headquarters) Japan Finance Corporation, Micro Business and Individual Unit 1-9-3, Otemachi, Chiyoda-ku, Tokyo, Japan Tel: Fax: Website: Kandabashi Exit Coop Bldg. JAPAN FINANCE CORPORATION to Kanda Development Bank of Japan ( Under Construction ) NTT Otemachi Bldg. Metroplitan Expressway Routes Otemachi Sta. (Chiyoda Line) KDDI Yomiuri Bldg. Sankei Bldg. Tokyo International Post Office Japan Post, Tokyo Branch Otemachi Bldg. to Tokyo Get more information! Website : More information regarding JFC-Micro as well as its international cooperation activities is available on the web. Newsletter : More information regarding JFC-Micro's international cooperation activities is available on newsletter. The latest and backnumbers are available on the web. JFC-Micro Outline and International Cooperation

16 For more information Please check our website URL Contact us! JAPAN FINANCE CORPORATION Micro Business and Individual Unit (JFC-Micro) International Cooperation Office 1-9-3, Otemachi, Chiyoda-ku, Tokyo , Japan Tel: Fax: Printed in Japan