SME DatabaseandAnalysis of SME dataNaoyuki YoshinoDean, Asian Development Bank Institute (ADBI)Professor Emeritus, Keio University, Japannyoshino@adbi.org, yoshino@econ.keio.ac.jp

Farhad Taghizadeh-HesaryAssistant Professor, Keio University, Japan May 29-2015The 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.

*SMEs in Japan

*SMEs in the Peoples Republic of China

Small and Medium Sized Enterprise(SME)Venture business Toyota, Honda, SONY, Seven-ElevenHONDA had no support by the governmentHONDA could not borrow money M-bank made loans to HONDA.How to finance start-up business ?Human capital development in SME*

Asian Financial Markets Main Features1. Bank-dominated financial system2. Small share of bond markets ---> Needs for long term financing 3. Lack of long-term investors such as pension funds and Life insurance4, Bench mark bond market (soverign bond) Infrastructure bond, corporate bond5. High percentage of SMEs6. Large share or Microcredit (finance companies); Lack of venture capital

*

High share of Deposits and InsuranceDiversification of Households Asset Allocation

Figure: Financial Asset Allocation of the US, Japan and Germany (Yen trillion)

Source: Yoshino (2013)

*

Large share: Deposits, Insurance and PensionsDiversification of Households Asset Allocation

Figure: Financial Assets Held by Households in Japan

Source: Bank of Japan (2014)

*

Accumulation of Assets by Old AgeRequired Reforms with Respect to Aging Population

Figure: Financial Assets of Japanese People by Age (Yen 10,000)

Source: Bank of Japan (2014)

*

AgeDepositsInsuranceSecuritiesOthersTotalAverage63530317952116920 years26626401034230 years298122774053740 years355241856274350 years53334412665106860 years81140927643153970 years1035333287521707

Access to Finance by SMEs and Large Firms in Japan*

Barriers for SMEs in Accessing Financial Institutions*Source: ADBOECD study on enhancing financial accessibility for SMEs: Lessons from recent crises. Mandaluyong City, Philippines: Asian Development Bank, 2013

Borrower, Lender and Market*BorrowerSMEsIndividuals

LenderBanksMicroCreditMarketInformation Asymmetry Especially SME market

Four Accounts by SME 1, Account to show Bankers2, Account to show tax authority3, His own account4, Account to show to his wife*

*

SMEs(14.4milliondata)

Defaults(1.7milliondata)Financial Institutions200Regional BanksCredit AssociationsCredit CooperativesGovernment BanksCentral BankCredit GuaranteeCorporations(Collect Data of SMEs)52 1, Government Support2, Reliability3, Security of InformationCRD SME Data base (CRD Data base)*

Basel Capital RequirementsBasel III1, Adequate Capital for Banks2, To keep healthy3, SME loans will decline4, Micro credit 5, Loan sharks6, Education to SMEs and borrowers*

Discussions1, Long term financing to corporations Large corporations2, large companies can access to bond market3, SMEs and venture businesses who will provide long term funds ?4, Evaluation of risks of SMEs5, SME database, CRD in Japan6, Hometown investment trust funds

CRD Database1, Sector, Location, Year of Establishment2, Real estates, Age of Owner3, Successor or not4, Financial Data (i) Cash & Deposits, (ii) Liquidity Assets and Fixed Assets (iii) Total Assets (iv) Short term and long term borrowings (v) Sales, Profits

*

*Possible Solutions Start up businesses Hometown Investment--------------------------------------------------A Stable Way to Supply Risk Capital

Yoshino, Naoyuki; Kaji Sahoko (Eds.)2013, IX, 98 p. 41 illus.,20 illus. in color

Available Formats:

ebookHardcover

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 BankingAccount

HometownInvestment Trust FundsRiskierBorrowersInvestorsDepositorsSaferSMEsBankingAccount*

E-banking, E-commerceTrade Credit high cost of sending money to overseasNew Entry to Transaction servicetraditional banks are so expensiveSONY and YEON retail store enter the businessFinger print identification by mobile phoneIndividual identification SS numberStart up Business --- Internet disclosure*

Investment in SMEs and start up businesses *

*

*

*5.B Credit Risk Database of Credit Guarantee

Selection of the variablesPrincipal Component AnalysisCluster Analysis*Analysis of SME credit risk using Asian data

*Examined Variable

*Cluster analysis: the average linkage methodDendogram Using Average Linkage

*Factor Loadings of Financial Variables after Direct Oblimin Rotation

Financial Education for SMEsEducation Program and Textbooks1, Financial Planners Association Individual Borrowing2, Central Bank of Japan Text books, Educate School teachers Regional Education Program3, Various Financial Associations Bankers Association, Stock Exchange *

Financial Planning for SMEs(i) Education for SMEs(ii) Japans Banks provided consultation services to SMEs(iii) Financial Education for SMEsText book and Education training Book Keeping Data collection*

Credit Rating of SMEs using Asian Data(i) Sales (ii) Assets (iii) Liquidity (Cash)(iv) Total Debt

*

*Grouping Based on Principal Component (Z1-Z2) and Cluster Analysis

Credit Rating for SMEs by Use of SME Database1, Credit Rating is only applicable to large companies2, Credit Rating for SMEs based on SME Data3, Three ranking of SMEs (Asian country) Five ranking of SMEs (Japans case)4, SME data can produce default risk ratio5, Risk based Interest rate *

Financial Education for SMEsEducation Program and Textbooks1, Financial Planners Association Individual Borrowing2, Central Bank of Japan Text books, Educate School teachers Regional Education Program3, Various Financial Associations Bankers Association, Stock Exchange *

*SMEs pay higher interest rate

Compounding interest rate (1+r), (1+r)2, (1+r)3, (1+r)4Start-up businesses are quite difficult to borrow money from banks (2) Plenty collateral required, tuna fish as collateral.

(3) Asset management skill by SMEs

(4) Pension management by SMEs

SMEs have to contribute 50% of the pension reserves of their employees. (5)Book keeping by SMEs

*ReferencesYoshino N. Kaji, S. (2013) Hometown Investment Trust Funds, Springer, March 2013Yoshino, N., Taghizadeh Hesary, F. (2015, Forthcoming), Analytical Framework on Credit Risks for Financing SMEs in Asia. Asia-Pacific Development Journal. United Nations Economic and Social Commission for Asia and the Pacific (UN-ESCAP)

*CopyRightYOSHINO/Feb23/2011**