Japan Finance Corporation. Guide to the Operations of the Micro Business and Individual Unit

Transcription

1 Japan Finance Corporation Guide to the Operations of the Micro Business and Individual Unit 214

2 C O N T E N T S Message from General Manager 2 Overview of Japan Finance Corporation Support for Micro/Small Business Operators 7 Great East Japan Earthquake Initiatives 8 Exercise of Safety Net Functions 9 Initiatives in the Growth Strategy Field 13 Collaboration with Chambers of Commerce and Industry, Societies of Commerce and Industry, and International Cooperation A note on figures used in this Report: 1. Figures for which the value is less than one whole unit. Numbers of items and amounts are rounded down to the nearest whole unit. As a general rule, percentages (%) are rounded down to the nearest first decimal place when less than four and rounded up to the nearest first decimal place when five or more. Therefore, figures in the total column may not match the figure obtained by calculating all individual items. 2. Figures Figures lower than the unit are shown as "." "-" is shown when there is no applicable figure. 1 Guide to the Operations of the Micro Business and Individual Unit 214

3 Message from General Manager Overview of Japan Finance Corporation Message from General Manager I would like to offer my deepest appreciation for your continued understanding and support of the business operations of Micro Business and Individual Unit of Japan Finance Corporation (JFC- Micro). In addition to financing in support of micro/small enterprises, we also provide loans intimately related to all phases of life such as educational loans to everyone who requires funding for when their children enter school. In addition to providing sustained support to corporations/ individuals whose financing was affected by the Great East Japan Earthquake, we actively respond to consultations from people interested in areas that lead to growth strategies such as business start-ups, social business, overseas business development and business revitalization. We will continue striving to fulfill our policy-based financing function - the mission of our organization - as an accessible financial institution for both SMEs and others. I look forward to your continued understanding and support. Japan Finance Corporation (JFC) is a policy-based financial institution which developed out of the National Life Finance Corporation, the Agriculture, Forestry and Fisheries Finance Corporation and the Japan Finance Corporation for Small and Medium Enterprise. Profile of JFC Name: Establishment: October 1, 28 Statutory Law: Head Office: Japan Finance Corporation (JFC) The Japan Finance Corporation Act Otemachi Financial City North Tower 1-9-4, Otemachi, Chiyoda-ku, Tokyo, Japan Yoshiharu Ueno General Manager, Micro Business and Individual Unit Japan Finance Corporation Basic Philosophy Focused Policy-based Financing Under the national policy, JFC will provide flexible policy-based financing by utilizing a variety of financing programs and schemes to meet the needs of society, while complementing the activities of private financial institutions. Message from General Manager Overview of Japan Finance Corporation Governor & CEO: Capital, etc.: Koichi Hosokawa Capital: 3,79.5 billion yen Reserve fund: 1,87.2 billion yen Branch Offices: Japan: 152 Overseas representative offices: 2 Employees: 7,364 (budgetary fixed number for FY214) Outstanding Loans: 21,17.7 billion yen Micro Business and Individual Unit 7,175.8 billion yen Agriculture, Forestry, Fisheries and Food Business Unit 2,63.7 billion yen Small and Medium Enterprise (SME) Unit 6,354.2 billion yen (finance operations) Operations to Facilitate Crisis Responses 4,911.5 billion yen Operations to Facilitate Specific Businesses Promotion, etc billion yen (as of March 31, 214 ) Mainstreaming Governance JFC will strive to conduct highly transparent and efficient business operations based on a high level of corporate governance and hold itself accountable to the public. Furthermore, JFC is committed to becoming a self-governing organization continuously evaluating and improving its activities. Total Loans Provided (Billion yen) 15, 1, 5, 5,421.1 FY28 1,336.2 FY29 6, ,17.5 5, ,285.3 FY21 FY211 FY212 FY213 Guide to the Operations of the Micro Business and Individual Unit 214 2

4 Overview of Japan Finance Corporation Major Business Operations of JFC Micro Business and Individual Unit Operations aimed at micro businesses and individuals Scope of operations Small loans for micro/small businesses Support for business start-ups and regional revitalization Educational Loans, and Loans Secured by Government Pensions, etc. Agriculture, Forestry, Fisheries and Food Business Unit Operations aimed at agriculture, forestry, fisheries and food business Scope of operations Loans for agriculture, forestry, fisheries and food business that foster and support principal farmers Loans for food industry that support food safety and security, and close collaboration between agriculture and food industry Management support services such as consulting and business matchmaking services Synergy Effect Supporting revitalization of local and regional economies Supporting business growth of customers Supporting the globalization of SMEs Small and Medium Enterprise (SME) Unit Operations aimed at SMEs Scope of operations Long-term business funds for SMEs Support for innovation, overseas expansion and business revitalization Acceptance of insurance on Credit Guarantee Corporation (CGC) guaranteed liabilities involving loans to SMEs and micro businesses Overview of Japan Finance Corporation Operations to Facilitate Crisis Responses and Specific Businesses Promotion, etc. Providing a certain credit to designated financial institutions at the occurrence of crises certified by the competent ministers, such as domestic or international financial disorder, large-scale natural disasters, and other similar events. Providing loans to designated financial institutions based on the Low Carbon Investment Promotion Act. Providing loans to designated financial institutions based on the Industrial Competitiveness Enhancement Act. Providing Loans for a Wide Variety of Activities Closely Related to Daily Life, Including Business Financing Customers Financing Programs Micro/small business operators General Loans General loans Corporations/Individuals in all types of business (may be unavailable to some people) Environmental Health Loans General loans Corporations/Individuals engaged in environmental health related businesses Special loans Corporations/Individuals involved in businesses start-ups and expanding business operations overseas Business promotion loans Provided to environmental health trade association members who have received approval for business promotion plans Managerial improvement loans (MARUKEI loans) Corporations/Individuals under the managerial advice from Chambers of Commerce and Industry or Societies of Commerce and Industry Environmental health improvement loans Corporations/Individuals receiving management guidance from environmental health trade associations, etc. Management support Consultations on new business establishment Management consultations Information sharing People who require educational financing Educational Loans (National Educational Loans) Provided to parents and legal guardians of students who have entered or are already matriculated at high schools, universities, etc. Those who receive a pension or mutual aid association pension Loans Secured by Governmental Pensions or Mutual Aid Association Pensions, etc. Provided to people who require funding for housing or businesses, etc. 3 Guide to the Operations of the Micro Business and Individual Unit 214

5 Breakdown of Loans (FY213) Loans Secured by Governmental Pensions or Mutual Pensions, etc. 6.3% Educational Loans 28.4% Environmental Health Business (EHB) Loans (including Managerial Improvement Loans for EHB) 2.3% Managerial Improvement Loans 9.6% General Loans 4.3% Educational Loans 6.8% Environmental Health Business (EHB) Loans (including Managerial Improvement Loans for EHB) 2.1% Managerial Improvement Loans 8.1% Ordinary Loans (General Loans) 5.5% Other Special Loans 2.1% Number of loans 4, loans Amount 2,454.5 billion yen Financing Performance of Business Funds (Billion yen) 4, 3, 2, 1, 31 2, , ,65.5 Special Loans 49.1% Safety-net Loans 33.8% Other Special Loans 15.3% Loans Secured by Governmental Pensions or Mutual Pensions, etc..4% , ,47.3 Number of loans Special Loans 77.1% Safety-net Loans 57.% 26 2,277.1 Amount (Thousand) Supporting Micro/Small Businesses Business loans have been provided to.93 million businesses, most of which were small loans. Approximately 9% of borrowers are businesses with nine or fewer employees, and approximately half are sole proprietorship. JFC-Micro Provides Support for Recovery Efforts in the Wake of the Great East Japan Earthquake In the wake of the Great East Japan Earthquake that struck on March 11, 211, JFC-Micro has provided support for the recovery and reconstruction efforts of small Details business operators who were victims of the P.7 disaster through the "Great East Japan Earthquake Recovery Special Loans." Function as a Safety Net Supporting the financing of micro/small business operators in response to changes in the management, financial, and other environments. Details P.5 Details P.8 JFC-Micro Provides Support to the Growth Strategy Field The number of loans made to business start-ups (consisting of those that have yet to start and those that are within one year of start-up) reached approximately 22,8. As a result... JFC-Micro has contributed to the hiring of 84, people per year. JFC-Micro supports "social businesses (NPOs, etc.)" that are engaged in solving community social problems. JFC-Micro supports micro/small businesses trying to expand overseas. JFC-Micro supports micro/small businesses engaged in recovery efforts. Details P.9 Overview of Japan Finance Corporation FY28 FY29 FY21 FY211 FY212 Note: Figures before FY28 October are based on data from the former National Life Finance Corporation. FY213 Collaboration with Chambers of Commerce and Industry JFC-Micro works closely with Chambers of Commerce and Industry, to support the management improvement efforts and other activities of micro/small business operators via the "Management Improvement Loan." Details P.13 International Cooperation JFC-Micro has provided many countries with know-how and information about SME finance. Details P.14 Guide to the Operations of the Micro Business and Individual Unit 214 4

6 Support for Micro/Small Business Operators Business Loans have been Provided to 93, Businesses, Most of which were Small Unsecured Loans The average loan balance per business is 6.79 million yen, most of which were small loans. Number of Business Borrowers and Average Loan Balance per Business (as of end of FY213) JFC-Micro Total for Credit Associations (267 credit associations) Total for Domestic Banks (139 banks) Number of business borrowers (million) Average loan balance per business (million yen) Notes: 1. Figures for JFC-Micro are the total of General Loans and Environmental Health Business Loans. 2. Domestic banks include major commercial banks, regional banks, secondary regional banks, and trust banks. 3. Figures for credit associations and domestic banks do not include loans to individuals (loans for housing, consumption, tax payments, etc.), loans to regional public organizations, overseas yen-loans, or loans made to businesses in foreign countries in name of their domestic branches. Number of business borrowers for credit associations and domestic banks are based on the number of loans. Source: Bank of Japan website The percentage of unsecured loans exceeds 7% of the total. Breakdown of Loans by Type of Collateral (Based on the Number of Loans) 265,919 (FY213) No collateral 76.1% Secured by collateral 23.9% Note: The breakdown is for the total of General Loans (direct loans) and Environmental Health Business Loans (direct loans). Most Borrowers are Micro/Small Business Operators, with Approximately Half Sole-proprietorships Borrowers are mainly micro/small business operators such as bakeries, restaurants, barber shops and hairdressers, building contractors, and others that have a close relationship with the people in local communities. Approximately 9% of the borrowers have nine or fewer employees, and approximately half of them are sole proprietorship. Breakdown of Loans by Number of Employees (Based on the Number of Loans) (FY213) 2 or more 3.9% Between 1 and % Breakdown of Loans by Capital, Individual and Corporation (Based on the Number of Loans) (FY213) Corporation/ Capital over 1 million yen 6.4% Between 5 and 9 2.2% 4 or fewer 68.% Note: The breakdown is for the total of General Loans and Environmental Health Business Loans (direct loans). Corporation/ Capital of 1 million yen or less 49.6% Individual 44.1% Note: The breakdown is for the total of General Loans (direct loans) and Environmental Health Business Loans (direct loans). 5 Guide to the Operations of the Micro Business and Individual Unit 214

7 JFC-Micro Provides Loans to Nearly All Regions and Types of Business We provide a wide variety of loans to micro/small business operators in diverse communities and working in all types of businesses through our 152 branch offices around the country. Breakdown of Balance of Loans by Region (Based on Amount of Loan) (as of end of FY213) (%) JFC-Micro Domestic Banks Kanto Kinki Kyushu Chubu Tohoku Chugoku Hokuriku Hokkaido Shikoku Notes: 1. Figures for JFC-Micro are the total of General Loans and Environmental Health Business Loans. 2. Domestic banks include major commercial banks, regional banks, secondary regional banks, and trust banks. 3. Figures for credit associations and domestic banks include loans to individuals (loans for housing, consumption, tax payments, etc.), loans to regional public organizations, overseas yen-loans, or loans made to businesses in foreign countries in name of their domestic branches. Source: Bank of Japan website Breakdown of Balance of Loans by Type of Business (Based on Amount of Loan) (as of end of FY213) Restaurant & Accommodation 8.2% Others 18.9% Manufacturing 11.5% Construction 14.7% Wholesale & retail 24.% Services 22.7% Note: The breakdown is for the total of General Loans and Environmental Health Business Loans (direct loans). Borrowers Include a Wide Variety of Micro/Small Business Operators, from Retail Stores with Close Connections to Life in Local Communities to Cutting-edge Companies Micro/small business operators represent an overwhelming majority of companies of every type and in every field of business at 87% of the total businesses in Japan. For example, borrowers include traditional retailers such as local grocery stores and neighborhood contractors, etc. as well as leaders in cutting-edge biological, IT, and other types of know-how and technology. In terms of growth stage, borrowers include companies with a short history that are aiming for growth and companies with a solid business. Borrowers include a wide variety of micro/small business operators from companies with a close relationship to local communities to companies ready to enter new markets. Inquiries for Business Loans: Business Loan Consultation Phone Number Hours of Operation, Monday to Friday: 9 am to 7 pm *Not available on weekends, national holidays, and during the New Year holidays. *You can request a consultation via the website. Japan Finance Corporation Search Breakdown of Loans by Number of Years in Operation (Based on the Number of Loans) (FY213) 4 or more years Under 5 years 1.% 3 or more years Under 4 years 11.7% 5 or more years 14.4% 2 or more years Under 3 years 14.2% Under 1 years 3.6% 1 or more years Under 2 years 19.1% Note: The breakdown is for the total of General Loans (direct loans) and Environmental Health Business Loans (direct loans). Mobile Phone Website Mobile Business Loans Guide to the Operations of the Micro Business and Individual Unit 214 6

8 Great East Japan Earthquake Initiatives We Provide Support to the Recovery and Reconstruction Efforts of Micro/Small Business Operators Affected by the Great East Japan Earthquake JFC-Micro supports the rehabilitation and reconstruction of micro/small businesses that have suffered damage at times of disaster such as earthquakes, typhoons and heavy snowfalls, by means of Disaster Loans that have more favorable repayment conditions than regular loans, such as a longer repayment period or a longer grace period for the principal. In the wake of the Great East Japan Earthquake that struck on March 11, 211, JFC-Micro has provided support for the recovery and reconstruction efforts of small business operators who were victims of the disaster through the "Great East Japan Earthquake Recovery Special Loans." Trends in Loans for the Great East Japan Earthquake (Cumulative) (March 11, March 31, 214) A total of 25,552 loans totaling 2,8.4 billion yen have been made to borrowers affected by the Great East Japan Earthquake between the time the disaster happened and March 31, 214. Performance of Loans for the Great East Japan Earthquake (Cumulative) (March 11, 211 to March 31, 214) Number of loans Amount (Billion yen) 2,5 2, 1,5 1, 5 76, ,361 1, ,322 1,915.4 (Number of loans) 25, 25, ,8.4 Sep. 3, 211 Mar. 31, 212 Mar. 31, 213 Mar. 31, 214 2, 15, 1, 5, Note: Loans for the Great East Japan Earthquake include Disaster Loans and Great East Japan Earthquake Recovery Special Loans (cumulative). Overview of the Great East Japan Earthquake Recovery Special Loans (Portion Handled by JFC-Micro) Borrowers (Note 1) Credit Ceilings Repayment period (grace period) Corporations/individuals who directly suffered damage from the earthquake or nuclear reactor disaster Corporations/individuals who indirectly suffered damage from the earthquake or nuclear reactor disaster Corporations/individuals who suffered other damage due to the disaster (damage caused by harmful rumors, etc.) 6 million yen (in addition to all types of financing facilities) Facilities and Equipment: 2 or fewer years (5 or fewer years) Operation: 15 or fewer years (5 or fewer years) Facilities and Equipment: 15 or fewer years (3 or fewer years) Operation: 15 or fewer years (3 or fewer years) Facilities and Equipment: 15 or fewer years (3 or fewer years) 48 million yen (Special) (Note 2) Operation: 5 or fewer years (8 or fewer years when required in special cases) (3 or fewer years) Notes: 1. Limited to those who conduct business and have places of business within specific disaster areas. For information about specific disaster areas, contact the consultation desk of a branch office. 2. Members of Environmental Health Trade Associations whose promotion plans have received approval receive 57 million yen (Special Operation Funding only). Great East Japan Earthquake Loan, Example No. 1: Support for a New Factory Company A is located in Fukushima Prefecture. The company manufactures and processes household kitchen supplies as well as commercial kitchen equipment. Company A's factory suffered significant damage in the disaster, but it remained in operation as a "disaster-stricken factory." In order to handle increased orders from commercial kitchen equipment manufacturers and others, the company subsequently acquired new machinery to equip its new factory. Their ability to manufacture high-precision, high-quality goods and automate their operations made 24-hour operation possible. JFC-Micro provided loans that funded the company's capital (facility & equipment) investment by co-financing with a local financial institution. The new factory Great East Japan Earthquake Loan, Example No. 2: Support for Transferring Operations to a New Store Company B is located in Miyagi Prefecture. It is engaged in the wholesale and retail sales of fresh fish caught in local waters. The company's store suffered devastating damage (it was completely destroyed) due to the tsunami, and the owners were forced to continue business operations in a temporary store. They subsequently found a good location and made arrangements to start operations in a new store. JFC-Micro provided loans that financed the equipment and operation costs related to transferring business operations to the new store. The new store 7 Guide to the Operations of the Micro Business and Individual Unit 214

9 Exercise of Safety Net Functions JFC-Micro Supports the Financing of Small Businesses Operators in Response to Changes in the Management, Financial, and other Environments We are meeting the demand for a safety net for micro/small business operators whose financing is affected by deflation and other changes in the social and economic environments. "Safety Net Loans (including earthquakes)" in FY213 totaled 138,16 loans. In addition, "Business Support Safety Net Loans (Loans for a Changing Business Environment) in FY213 to corporations/individuals who had a fixed debt burden and who suffered temporary worsening of their financial condition totaled 8,135 loans. Financial performance of Safety Net Loans (number of loans) (Loans) 25, Effects of the strong yen 238,41 218,438 Economic downturn Great East Japan Earthquake in 211 2, precipitated by the Lehman Brothers bankruptcy in ,24 156,596 15, 141,67 138,16 1, 5, Overview of Safety Net Loans FY28 FY29 FY21 FY211 FY212 FY213 Note: Performance of the number of Safety Net Loans and Environmental Health Safety Net Loans (including earthquakes) issued to the business operators. Types of loans Customers Loan amounts Repayment period Funds for changes in the business environment Funds for changes in the financial environment Funds for bankruptcies of customers Corporations/individuals whose business conditions have been negatively affected by declines in sales, etc. Corporations/individuals who are suffering financing difficulties due to the bankruptcy of their financial institution Corporations/individuals who are suffering business difficulties due to the bankruptcy of their customer(s), etc. 48 million yen or less Facility & Equipment 15 or fewer years Operating 5 or fewer years Special 4 million yen or less (8 or fewer years when required in special cases) Special 3 million yen or less Operating 5 or fewer years (8 or fewer years when required in special cases) Note: The same system exists for members of Environmental Health Trade Associations whose promotion plans have received approval (Only for operating loans. Does not include Loans for Customer Bankruptcy). (Note 1) Overview of Management Support-Type Safety Net Loans Corporations/individuals who have a heavy debt burden, are under pressure to improve management, and have created a business plan per management direction and advice from an approved management improvement, etc. support organization (Note 2) or JFC are eligible for special interest rates. Notes: 1. Refers to Safety Net Loans and Environmental Health Safety Net Loans. 2. An "approved management improvement, etc. support organization" is defined as a support organization (licensed tax accountant, certified public accountant, small and medium enterprise management consultant, etc.) that operates under the SME New Business Activities Promotion Law. See the website of the Small and Medium Enterprise Agency for details. A Special Consultation Desk has been Established to Quickly Handle Consultations from Micro/Small Business Operators A special consultation desk is immediately established in case of an unforeseen event such as a natural disaster or a major corporate bankruptcy so that affected micro/small business owners can consult about their loan and repayment conditions. Main Consultation Desks Currently in Operation (as of May 31, 214) Number of consultation desks Disaster-related 11 Others 4 Names of main consultation desks Date of establishment Special consultation desk for the Great East Japan Earthquake Mar. 211 Special consultation desk for damage suffered as a result of Typhoon No. 12 in 211 Sep. 211 Special consultation desk for damage suffered as a result of heavy rain and severe storm that struck between June 8 and July 23, 212 Jul. 212 Special consultation desk for damage suffered as a result of Typhoon No. 26 in 213 Oct. 213 Special consultation desk for damage suffered as a result of heavy snowfall that began on February 14, 214 Feb. 214 Special consultation desk for countermeasures against increases in the cost of raw materials and energy Feb. 214 Special consultation desk for overcoming deflation, etc. Feb. 214 Guide to the Operations of the Micro Business and Individual Unit 214 8

10 Initiatives in the Growth Strategy Field The Number of Loans Made to Business Start-ups (Consisting of Those that have yet to Start and Those that are Within 1 Year of Start-up) has Reached Approximately 23, a Year Many corporations/individuals who are about to start up a business or have recently started up a business find it difficult to procure funds due to lack of a history of business performance. JFC-Micro actively funds these business start-ups. Performance of Loans Issued to Start-up Businesses (Number of Businesses) The number of loans made to business start-ups (consisting of those that have yet to start and those that are within 1 year of start-up) totals approximately 22,8. 8,483 businesses received loans under the New Start-up Loan program in FY213. The program provides no-collateral, no-guarantor loans to start-ups that have not yet filed their tax returns for their second business year. Approximately 84, jobs have been created as a result of loans issued to business start-ups. This is a level that is on par with the number of employees at 69 major companies (Note). Note: Calculation based on an average of 1,226 employees at major companies as reported in the supplementary statistical information of the Small and Medium Enterprise White Paper (213 edition). [Job Creation Effects] 22,8 companies x average of 3.7 employees (Note) = 84,36 Note: The average number of employees at time of business start, based on Survey on Business Startups in Japan (FY213) by the JFC Research Institute. Performance of Loans Issued to Start-up Businesses (Number of Businesses) 2, 1, Prior to or within 1 year of start-up (Number of companies) 3, 16,465 7,128 19,469 New Start-up Loan program 22,8 7,926 8,483 FY211 FY212 FY213 JFC-Micro Actively Supports Women, Youth, and Senior Entrepreneurs The scope of business start-ups is broadening as the economic system becomes more diverse with start-ups by women who take advantage of their ability to notice the small things in daily life, young people who utilize novel ideas in their business start-ups, and seniors who draw on their many years of experience when they establish new businesses. JFC-Micro actively funds these business start-ups. Loans Made to Women, Youth and Senior Entrepreneurs (No. of companies) Women Youth (aged under 3) Seniors (aged 55 and older) FY212 FY213 FY212 FY213 FY212 FY213 3,724 businesses 4,63 businesses 1,718 businesses 1,817 businesses 1,659 businesses 2,283 businesses Note: Women who also qualify as youth or seniors are included in the Women category. Example of a Loan Issued to a Woman Entrepreneur: Starting Up a Diamond Jewelry Retail Business that Ensures Mining and Processing are Done with Regard to Human Rights and Environmental Concerns Company C is a jewelry retailer that deals in products that were handled under the "Ethical Diamond" program, which ensures that mining and other processes are carried out without ethical and other problems. The president of the company has experience working in the field of international cooperation and started the company based on the idea that the severe conditions in developing countries particularly in Africa where diamonds are mined must be improved. The social significance of supporting developing countries has received high praise. JFC-Micro provided loans to fund initial purchases of merchandise in stock at the time the company was founded. A wedding ring with a diamond mined under the Ethical Diamond program Example of a Loan Issued to a Young Entrepreneur: Spreading Japan's Cute Cartoon Characters Around the World Company D developed a corporate Facebook page specializing in Japan's cute cartoon characters. The company has created a business model that takes advantage of the 5.7 million followers of its Facebook page to derive income from affiliations with webstores and advertising. It has received praise for its method of popularizing cute Japanese cartoon characters around the world, and has been chosen as a Ministry of Economy, Trade and Industry "Company with an eye for establishing new business and training support personnel." JFC-Micro provided loans to fund operations until sales reached expected levels. From Company D's Facebook page 9 Guide to the Operations of the Micro Business and Individual Unit 214

11 Example of a Senior Entrepreneur: Restaurant for Senior Interaction The founders of Company E used the connections they had created during their years in the business world to establish a restaurant whose aim was to be a network seniors could use to interact. As the customers were to be seniors, it was important to create an atmosphere that was comfortable for seniors to get together and talk over drinks. They planned to create tie-ups with local community centers in order to expand the scope of their activities. JFC-Micro provided loans that funded facility and equipment costs such as remodeling of the store and the purchase of kitchen equipment, and operation costs such as initial purchases of merchandise in stock. Outside view of the restaurant A JFC First! High School Student Business Plan Grand Prix In FY213 JFC-Micro held the first "Creativity Unlimited: High School Student Business Plan Grand Prix" that accepted entries from high school students from around Japan. 1,546 entries were received from 151 high schools and school visits were made to 82 schools to provide help with the creation of the students' business plans. Finalists from 8 schools gave enthusiastic presentations at the last round of judging, which took place in January 214. The project presented by students from Uwajima Fisheries High School (Ehime Prefecture), "Presents from the Uwa Sea: Abalone raised by Uwajima Fisheries H.S. using ecologically-friendly methods" won the Grand Prize. The event was widely covered in the media. JFC-Micro is committed to continuing in its effort to increase the number of future entrepreneurs by planting the seeds of entrepreneurship among high school students and other young people. For details, see the JFC website Students at Uwajima Fisheries High School receiving their Grand Prize award JFC-Micro Supports Businesses that Take on the Challenge of Innovative New Technologies In March 213, Capital Loans (Provision Scheme for Challenge Support and Capital Enhancement) was established to support businesses such as those conducting research using innovative new technologies. Financial Performance of Capital Loans In FY213 the program provided loans to 11 companies. JFC-Micro actively supports companies such as research and development venture companies that have a large research and development debt burden but at the same time have a high degree of technological skill. Example of Funds Provided by the Capital Loan: Development of a Low-speed, High-torque, High-output Motor Company F was founded by six leading engineers formerly employed at motor manufacturers. They are working on developing a low-speed, high-torque, high-output motor. This technology has received high praise, for example, by being selected for a FY21 Low-carbon, Job Opportunity Creating Industries Promotion Project grant provided by the Ministry of Economy, Trade and Industry. The technology can be applied to a wide variety of industrial machinery including press machines, injection molding machines, and transport and cargo vehicles. JFC-Micro provided operating loans to provide funds required for product improvement and mass production. JFC-Micro Supports Venture Businesses Originating in Universities through Cooperation Between Industry and Academia Many revolutionary technologies were first developed in university research labs. JFC-Micro cooperates with local universities and acts as a bridge between universities and micro/small businesses. A low-speed, high-torque, high-output motor Number of universities with which memoranda for industry academia collaboration have been signed 46 (As of the end of May 214) Example of Loans Provided to a Revolutionary Company that Utilizes a High Degree of Technical Skill: Providing Funds for Research and Development Company G is a venture company that originated in a national university. It is involved in the research and development of vaccines and pharmaceuticals that use gene recombination that is effective against infectious diseases and cancer. Because the development of vaccines and pharmaceuticals requires a large number of processes such as basic research, non-clinical trials, and clinical trials, a great deal of time is required before they can be placed on the market and acquire value. JFC-Micro was involved in consultations and requests for assistance from this company through its university-based industry and academia cooperative organization. As the loan screening process progressed, detailed information was exchanged with the Prefectural Industrial Support Center (JFC had previously entered into a partnership agreement with this center in order to assist with local community An electron microscope used in vaccine research revitalization efforts) that supported this company. This company has been spotlighted for its high degree of technological skill and its potential for development as a leading company in its community in the future and for this reason JFC-Micro provided it with funding. Guide to the Operations of the Micro Business and Individual Unit 214 1

12 Initiatives in the Growth Strategy Field JFC-Micro Supports Social Businesses JFC-Micro supports Social Businesses (Note 1) engaged in solving community issues and which create stable and ongoing employment. In FY213 4,987 loans were issued to Social Businesses totaling 44.9 billion yen. Of those, 74 loans (an increase of 115.6% over the previous year) were issued to NPOs totaling 5.8 billion yen (an increase of 118.3% over the previous year), and 4,759 (an increase of 112.5% over the previous year) were issued to nursing care and welfare businesses (Note 2) totaling 43.4 billion yen (an increase of 18.2% over the previous year). Note :1. A wide variety of social problems exist in local communities, including environmental protection, nursing care and welfare services for the elderly and the disabled, support for child-raising, community revitalization, sightseeing, etc. Social Businesses are organizations that utilize business methods and cooperate with a variety of entities such as local residents, NPOs, companies, and others to solve these kinds of problems in local communities. (Source: Ministry of Economy, Trade and Industry Homepage) Note :2. Companies involved in welfare and nursing care for the elderly, child welfare, welfare for the disabled, as well as other companies involved in social insurance, social welfare, and nursing care. Financial performance of Social Business-related loans (Billion yen) , FY211 Number of loans 4, FY212 Amount (112.5%) 4,987 (18.6%) 44.9 FY213 Notes: 1. Figures in parentheses represent the comparison with the previous year. 2. Totals for loans issued to NPOs and companies involved in nursing care and welfare services (NPOs that are engaged in nursing care and welfare services are not counted twice). (Loans) 6, 3, Loan Provided to Social Business, Example 1: Establishment of an After-school Care service for School Children that Specializes in Nutrition Education Company H operates an after-school care service for elementary school students called "Shokuraku School." The service is based on the concept of "cultivating the power to make dreams come true through learning about nutrition." It is not only an after-school care service but also serves as a "juku" (private learning center) where students can experience hands-on learning of business administration and learn about nutrition. Each month, students learn about nutrition around the world and open a store. Through this experience, students increase their knowledge of history and science and grow as people by improving their communication skills and ability to give presentations. The goal of the service is to provide students with the skills necessary for them to make their dreams come true. JFC-Micro provided loans to help cover the operation costs required to operate the education program and other aspects of this service. Shokuraku School class Loan Provided to Social Business, Example 2: Establishment of a Group Living (Note) Facility in a Renovated Vacant Home Company I set up a completely barrier-free group living facility in a private home in order to provide a place where single men aged sixty and over could live together. The residents set the house rules through discussion among themselves. People were able to take up residence in the facility without having to pay rent in advance as a down payment and without having to renew their lease, meaning that the facility could be used for the rest of their lives. The medical and nursing care needs of residents were met through link-ups with medical and nursing care companies. JFC-Micro provided funding required to cover facility and equipment costs related to the renovation of the building. Note : The goal of small residential group homes is to allow elderly and other residents to realize lifelong self-realization and lead healthy senior years through community group living that respects individual autonomy and that is available at a relatively low cost. (Source: Alternative Housing & Living Association Homepage) Barrier-free washroom and bathing facilities that can accommodate wheelchairs JFC-Micro Supports Micro/Small Businesses Seeking to Expand Overseas through Information and Funding JFC-Micro works in cooperation with JETRO, the Japan Federation of Bar Associations, and other specialized organizations that support overseas development to conduct consultation services. Through these relationships, we provide information that meets customer needs. The number of loans provided through the Loans for Overseas Expansion totaled 522 in FY213. Approximately sixty percent of these loans were issued to wholesalers and retailers. Customers include corporations/individuals working in fields that are popular overseas such as Japanese cuisine and local traditional crafts, the so-called "Cool Japan" fields. Breakdown of Loans by Type of Business (Based on the Number of Loans) (FY213) Wholesale & retail 58.6% Manufacturing 21.1% Others 4.6% Services 13.2% Telecommunications 2.5% Example of Funds Provided through the Loans for Overseas Expansion: Traditional Crafts to the Children of Lebanon Company J is a shop with a long tradition (it was founded in 199) that has been designated by Ono City, Hyogo Prefecture as a dealer in "Banshu abacus," a special traditional craft. It has a wide variety of abacus-related products that it developed using materials and manufacturing technologies used in abacus production. These include board games using abacus beads and cellphone straps. The company is expanding its overseas sales in places such as Lebanon, which is adopting the use of abacuses in elementary schools as a way to foster their students' mathematical ability and concentration. JFC-Micro provided funds to help cover the cost of exporting abacuses. Dice made of abacus beads 11 Guide to the Operations of the Micro Business and Individual Unit 214

13 Supporting Revitalization in City Centers and Shopping Districts JFC-Micro supports parties working to revitalize city centers and shopping districts by providing loans under programs including the business vitality strengthening fund and the Loans for Modernization of Grocery Retailers, and information to such as local governments. Number of loans to businesses in approved city centers (FY213): Number of loans Amount Total Loans Provided 16, billion yen JFC-Micro Supports Micro/Small Businesses as They Work to Recover Through the business reconstruction & business succession support fund, JFC-Micro supports parties undergoing corporate Total Loans Provided (FY213) under the Business Reconstruction and Business Succession Support Loan program reorganization through involvement of the Small and Medium Size Business Rehabilitation Support Co-operative, approval of reconstruction plans based on the Civil Rehabilitation Act, or collaboration Total Loans Provided Number of loans 199 Amount 3,9 million yen with commercial financial institutions, and business succession. With business support managers at 152 branches nationwide, JFC-Micro flexibly responds to requests to have their repayment terms relaxed by temporarily extending principal repayment due dates or reducing monthly payment amounts. JFC-Micro supports business owners working toward administrative improvement by offering support in creating administrative improvement plans and offering advice designed to solve administrative problems. JFC-Micro is Strengthening the Support it Provides to the Growth Strategy Field Business Start-Up Support Desks and Overseas Expansion Support Desks have been Established in the 152 Branch Offices Around the Country Business Start-Up Support Desks provide services in which full-time staff offer advice on business start-up plans to people planning to start up a business and offers a wide variety of information on starting a business. Overseas Expansion Support Desks offer consultation services on financing and various issues such as required approvals and checking contract details through relationship with JETRO and the Japan Federation of Bar Associations, etc. The Desks provide detailed support to meet customer needs. <<The 152 branch offices throughout the country are open weekdays from 9 am to 5 pm. No appointment necessary.>> Business Start-Up Support Centers and Business Support Plazas have been Established throughout the Country [Business Start-up Support Centers] Centers are located in 15 regions of Japan from Hokkaido to Kyushu. Centers provide timely support to customers through collaboration with regional organizations that support startups. Centers organize diverse seminars targeted at customers in varying stages of their business cycle, both before and after starting business. FY213 Number of times instructors were sent to business start-up support organizations, etc.: 385 Number of business start-up seminars conducted: 173 [Business Support Plazas] In six locations: Sapporo, Sendai, Tokyo, Nagoya, Osaka, and Fukuoka. Appointments for consultation are available to persons who plan to start a new business and those who have never used JFC s services. For those who cannot visit during regular business hours, weekend and evening appointments are also available (excluding national holidays). Notes: 1. Sunday consultations are available on first and third Sundays of each month at Tokyo Business Support Plaza. 2. Night consultations are available at Tokyo Business Support Plaza (every Thursday) and Osaka Business Support Plaza (every second and fourth Tuesday). Locations (as of June 214) Fukuoka Kumamoto Business Start-up Support Centers Business Support Plazas Osaka Chugoku Kobe Shikoku Hokuriku Tama Nagoya Kyoto Hokkaido Tohoku Kita-Kanto Shinetsu Tokyo Minami-Kanto Guide to the Operations of the Micro Business and Individual Unit

14 Collaboration with Chambers of Commerce and Industry, Societies of Commerce and Industry, and International Cooperation JFC-Micro Collaborates with Chambers of Commerce and Industry and Societies of Commerce and Industry JFC-Micro works in close collaboration with regional Chambers of Commerce and Industry, and with Societies of Commerce and Industry throughout Japan to support business improvement of micro/small businesses via Managerial Improvement Loans (MARUKEI Loans; unsecured and unguaranteed) and consultation sessions. Overview of Managerial Improvement Loans (MARUKEI Loans) Managerial Improvement Loans (MARUKEI Loans) are a program whereby micro/small businesses receiving management guidance, such as from Chambers of Commerce and Industry or Societies of Commerce and Industry, can utilize funds needed for managerial improvement without collateral or guarantors. Since the program was established in 1973, it has been accessed for a total of approximately 4.88 million cases. Structure of Managerial Improvement Loans (MARUKEI Loans) Loans JFC-Micro Small Business Operators Recommendation Collaboration Management guidance Consultation, application Chambers of Commerce and Industry and Societies of Commerce and Industry Total number of Managerial Improvement Loans (MARUKEI Loans) Provided (Billion yen) , Number of loans 4, Amount 39, (Loans) 5, 4, 3, 2, 1, FY211 FY212 FY213 Holding of One-Day JFC Consultation Sessions at Chambers of Commerce and Industry and at Societies of Commerce and Industry Consultation sessions called One-Day JFCs, where staff from JFC-Micro consult on finance, are held at Chambers of Commerce and Industry and at Societies of Commerce and Industry. Every year, many micro/small businesses utilize the consultations services. Number of One-Day JFCs held at Chambers of Commerce and Industry and at Societies of Commerce and Industry FY211 FY212 FY213 2,792 3,21 2,696 Cooperation through Business Start-up and Management Improvement Support Seminars JFC-Micro actively participates in activities that support local business start-ups and management improvement by co-sponsoring business start-up and management improvement seminars with Chambers of Commerce and Industry and Societies of Commerce and Industry. At these seminars we provide simple explanations of how to create business plans, how to procure funding, JFC's loan programs, and other issues to people interested in starting up a business or moving into a new field. Many of the people who attend these seminars later utilize JFC-Micro loans for business start-ups and management improvement. JFC-Micro Actively Collaborates with Regional Financial Institutions JFC-Micro is working to reinforce its collaboration with regional financial institutions that are working to strengthen their relationships with the local communities as providers of funds ("relationship banking") mainly in the area of start-up support operations. 13 Guide to the Operations of the Micro Business and Individual Unit 214 Community Business Forum for entrepreneurs cosponsored with Chamber of Commerce and Industry Collaborative Loans (Number of loans) (Loans) 7, 6, 5, Cooperative loans 4, 3,121 3, 2, 1, , FY211 FY212 6,622 3,798 FY213 Notes: 1. Cooperative loans are loans issued via referral from a financial institution. 2. Collaborative loans are loans that are co-financed with financial institutions. Collaborative loans

15 International Cooperation Technical Assistance Through the ODA project, JFC-Micro cooperates with financial institutions in developing countries which are trying to overcome various challenges, by providing them with know-how about credit analysis for SMEs. Since June 211, we have provided technical assistance for Lao Development Bank (LDB) in the field of SME finance in conjunction with the Policy Research Institute (PRI) of Ministry of Finance (MOF), Japan. This project aims to enhance LDB personnel and to improve its credit operations. We have already held a total of four approximately two-week long seminars in Laos and Japan. LDB employees attended lectures on topics such as credit analysis. So far, we have implemented similar projects in Vietnam and Malaysia. Laos is the third country. Period Item Place Contents June 211 Conclusion of MOU Laos -Conclusion of MOU for project November 211 1st Seminar Laos (3 Cities) -Lectures on basic credit analysis and credit management June 212 2nd Seminar Japan (Tokyo, Kobe) - Lectures on credit analysis, credit risk, business startup support, marketing strategy and human resource development -Site visit on branch offices and their clients January 213 3rd Seminar Laos (3 Cities) - Lectures on credit analysis, case-study, analysis for LDB s approval documents August 213 4th Seminar Laos (2 Cities) -Lectures on compliance, case-study and credit management Cooperation with APEC Financial Institutions Dealing with SMEs To promote cooperation with SME-related financial institutions within the APEC region, JFC-Micro signed an MOU (Note) with 14 financial institutions in the region, including the China Development Bank (CDB) and the Small and Medium Enterprise Development Bank of Thailand (SME Bank). JFC-Micro attends the annual meeting and engages in technical cooperation and information exchange. Note: Memorandum of Understanding on Cooperation among APEC (Asia-Pacific Economic Cooperation) Financial Institutions Dealing with SMEs. Acceptance of Foreign Missions A lot of missions from foreign countries including developing countries come to Japan every year to learn Japan s experience. Approximately 2 missions, such as a part of a training course of JICA, visit JFC-Micro every year to study SME finance. We give them some lectures on our profile, history, loan programs, business start-up support etc. Guide to the Operations of the Micro Business and Individual Unit