2008 - 2010
The purpose of this project is to examine, from a policy perspective, how risk capital can be supplied to small and medium enterprises (SMEs) and local economies during the current financial crisis. Policy evaluation will be conducted with an aim to formulate policy recommendations to the extent possible. With these objectives in mind, the following questions will be analyzed from the perspective of SME-related policies: (1) how can funds be supplied to local economies and to local SMEs in particular? and (2) what should be the source of such funds?
Under the existing systems, the supply of risk capital is clearly provided for in locally specific financing programs (relationship banking) in the form of financing and loans for startups. Because certain credit risks cannot be fully covered in indirect financing, efforts have been made to utilize capital funds and hybrid lending (upside return-type financing). However, the scale of these types of funding is extremely small compared to total lending by financial institutions. Under these conditions, it is critically important to analyze the feasibility of supplying risk capital through relationship banking. This project intends to examine the following issues:
- 1) Verification of local funding needs (defining the concept of "local" and gauging funding needs);
- 2) Conditions and effectiveness of funding provided by the Organization for SMEs and Regional Innovation;
- 3) Effectiveness of innovative financing (hybrid financing, securitization, etc.);
- 4) Government involvement in supporting local start-up businesses (role of the government-affiliated financial institutions, interrelation and competition among local financial institutions, etc.);
- 5) Methods essential to the development of relationship banking (intellectual assets as soft information, business evaluation of intellectual assets);
- 6) New types of local initiatives (resident-participatory projects, financial NPOs, nursing care businesses and other schemes for the introduction of private funds); and
- 7) Examination of advanced methods in foreign countries (revenue bonds, etc.).
March 10, 2009 - March 31, 2010