Role of National Development Banks in SME Financing 5_Farhad... · · 2017-10-23Role of National...
-
Upload
truongkhanh -
Category
Documents
-
view
217 -
download
2
Transcript of Role of National Development Banks in SME Financing 5_Farhad... · · 2017-10-23Role of National...
Role of National Development
Banks in SME Financing
Naoyuki YOSHINO, Ph.D.Dean, Asian Development Bank Institute (ADBI)
Professor Emeritus, Keio University, Japan
Farhad TAGHIZADEH-HESARY, Ph.D.Faculty member, Keio University, Tokyo, Japan
Sep 28, 2017
Bangkok
UN-ESCAP
1. IntroductionNational Development Banks (NDBs) can contribute to
solving a number of market failures.
NDBs can promote financial sector development by offering
long-term loans with lower interest rate to SMEs and helping to
create inclusive financial sectors. SMEs have information
asymmetry and many private FIs are not interested to lend
them.
NDBs also enhance the climate for business and attract private
sources of capital in the domestic economy.
NDBs can act as a catalyst and promoting and supporting
SMEs how ever there are some considerations with this regard
that will be highlighted in this presentation.
Copyright: Yoshino & Taghizadeh-Hesary (2017)
2
2- Three difference ways of funding development
banks
Postal Saving
or Postal
Deposits
Ministry of
Finance Development
BanksCase 1
Development
Banks
Development
Banks
Ministry of
Finance
DepositorsSME, Startup
businesses
Issuance of
Government
Bond
Case 2
Case 3
Copyright: Yoshino & Taghizadeh-Hesary (2017)
4
Role of JFC in Credit Guarantee to finance SMEs in Japan
Source: Japan Federation of
Credit Guarantee Corporations (JFG)
3- Case 1: Japan Finance Corporation (JFC)
Small business finance
corporation and People's bank
Finance Corporation, merged and
created JFC
Copyright: Yoshino & Taghizadeh-Hesary (2017)
7
Policy-based financing of SME and Start-ups
A)Support for Start-up and new businesses
Source: JFC (2016)
Copyright: Yoshino & Taghizadeh-Hesary (2017)
8
B) Support for SME revitalization
Source: JFC (2016)
Copyright: Yoshino & Taghizadeh-Hesary (2017)
9
C) Capital support
Source: JFC (2016)
Capital subordinated loan
Copyright: Yoshino & Taghizadeh-Hesary (2017)
10
D) Support for Social Businesses
Source: JFC (2016)
effete
Copyright: Yoshino & Taghizadeh-Hesary (2017)
11
E) Supporting SMEs in less productive sectors
(Agriculture, …)
Source: JFC (2016)
Copyright: Yoshino & Taghizadeh-Hesary (2017)
12
F) Support for Overseas expansion of SMEs
Source: JFC (2016)
kejdklejfekl
Copyright: Yoshino & Taghizadeh-Hesary (2017)
13
4- Important characteristics of NDBs
1- Long-term financing (long-term loans) comparing to
commercial private banks
- Private banks resources (deposits) are short-term, 1year, 2
years, 3 years. Private banks are not able to provide long-term
loans. So maturity of NDBs loans has to be long-term comparing
to private banks.
2- Setting up the interest rate lower than private banks
stable and fixed.
• Private banks often change their interest rates. However for
stable growth, SMEs need stable and fixed interest rate.
• Private banks has to pay Tax and they have to set up their own
branch offices so require more costs comparing to government.
Therefor private banks interest rate are higher than NDBs.
Copyright: Yoshino & Taghizadeh-Hesary (2017)
14
5- Case 2: Use of Postal Savings (Post Bank)
Postal Savings
Pension Funds
(Japan, Germany,..)
Ministry
of
Finance
Postal
SavingsPostal Insurance
24700
Easy Access
Sell
Private products
Government
Banks
Loan to SME
Infrastructure
Government
Bond
Government
Expenditures
Postal
BankSME Loans
Housing
Private
Financial
products
Private Loans
Private
Investment
Copyright: Yoshino & Taghizadeh-Hesary (2017)
Cost Efficiency and advantages of Postal
Savings1. Scale Economy: Nationwide Post Offices, 24,700
branches (easy access to post offices)
2. Economies of Scope (German Post Bank)I. Mail Services
II. Postal Savings
III. Post Life Insurance (prepare retirement)
IV. Payment of Social securities
3. Financial inclusion of rural region
4. Reliability of Post Office MasterI. (Post office master in Japan is respected
5. Affordable transaction costs
6. Deposit Insurance (same with private deposits)
7. Inspection and Supervision (FSA, BOJ, DICJ)
Copyright: Yoshino & Taghizadeh-Hesary (2017)
16
Crowding In Effects
Interest
Rate
Government
Loan Supply
Private Bank
Loan Supply
Bank LoansCopyright: Yoshino & Taghizadeh-Hesary (2017)
①
②
17
①
②
Crowding-out by GovernmentInterest
Rate
Government
Loan Supply
Private Bank
Loan Supply
Copyright: Yoshino & Taghizadeh-Hesary (2017)
18
How to avoid crowding out: Case of Germany, KfW (established 1948)
Formed after World War II as part of the Marshal Plan
• In Japan, (DBJ, JFC, and many other development banks) are always
criticizing of crowding out, because they have branches all over Japan, and
competing with private banks.
• The KfW is only located in Frankfurt, no braches, only lending to private banks
for different purposes such as (SME, green energy, housing) not directly to
SMEs, hence not competing with private banks.
Frankfurt
Private
Banks
Depositors
SMES
Copyright: Yoshino & Taghizadeh-Hesary (2017)
19
6. Conclusion
1. Lower interest rate, stable, and long-term loans
by NDBs
2. Avoid Bad Effects of government lending
through NDBs:
– Increase of government role
– Crowd out private deposits and loans
3. German KfW: successful case– Government money goes through private banks to SMEs,
housing, green energy and etc.
4. Make loans by NDBs where:
– private banks cannot make loans
Copyright: Yoshino & Taghizadeh-Hesary (2017)
20
Reference:1. UN (2006). Rethinking the Role of National Development Bank. United Nations Department of
Economic and Social Affairs.
2. Yoshino, N. (2012). Global Imbalances and the Development of Capital Flows among Asian
Countries. OECD Journal: Financial Market Trends. Vol. 2012/1.
3. Yoshino, N. (2013). The Background of Hometown Investment Trust Funds. In N. Yoshino and S.
Kaji, eds. Hometown Investment Trust Funds: A Stable Way to Supply Risk Capital. Tokyo:
Springer.
4. Yoshino, N. and F. Taghizadeh-Hesary (2014). An Analysis of Challenges Faced by Japan’s
Economy and Abenomics. The Japanese Political Economy 40: 1–26. DOI:
10.1080/2329194X.2014.998591
5. Yoshino, N. and F. Taghizadeh-Hesary (2014). 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). 21(2): 1-21.
6. Yoshino, N., Taghizadeh-Hesary, F., Nili, F. (2015), ‘Estimating Dual Deposit Insurance Premium
Rates and Forecasting Non-performing Loans: Two New Models’. ADBI Working Paper 510.
Asian Development Bank Institute: Tokyo
7. Kuwahara, S., N. Yoshino, M. Sagara, and F. Taghizadeh-Hesary. (2015). Role of the Credit Risk
Database in Developing SMEs in Japan: Lessons for the Rest of Asia. ADBI Working Paper 547.
Tokyo: Asian Development Bank Institute.
8. Yoshino, N. and F. Taghizadeh-Hesary. (2015). Analysis of Credit Risk for Small and Medium-
Sized Enterprises: Evidence from Asia. Asian Development Review (ADR). Vol. 32 No. 2.: 18-37,
MIT Press.
Copyright: Yoshino & Taghizadeh-Hesary (2017)
21