The 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.

How regional financial institutions will

contribute to the development of SMEs?
Measurement method of effect: Case of Regional Bank
(Commercial Bank) and Shinkin Bank (Cooperative Bank) in Japan.

Kiyotsugu Yoshihara, Kyoto University Researcher

Digital Innovation and SME finance

29-30 October 2018
Radission Blue Plaza Bangkok Thailand
Kiyotsugu Yoshihara, Kyoto University Researcher.
e-mail: yoshihara.kiyotsugu.2x@Kyoto-u.ac.jp
 Out line
• Part 1：Introduction.
• Part 2：Regional financial institutions in Japan.
• Part 3 : New bank evaluation index.
• Part 4 : Final remarks.
Part 1 : Introduction
• Japan was destroyed during World WarⅡ.
• Japan is different from the United States (GDP 1st) and
China (GDP2nd).
• Typhoon, earthquake, atomic bomb, no natural resources.

Why Japanese economy developed ?

Part 2 : Policy of regional banks in Japan

• Nowadays, banks are required not only to act as provider of

capital, but also to provide consultation to and continuously
support for the restructuring and development of client firms
through its long-term business relationship.

• Banks can reaffirm the meaning of their existence by making

improvements in their client firms’ performance over the long
term.
Structure of Japan banks
World
Mega bank

Whole Japan
Mega bank

Prefecture
Regional
bank

City
Shinkin
bank
 Characteristics of Shinkin Banks

- Regionality
They serve a limited business territory.

- mSME-centricity
They serve primarily mSME in their business territories.

- Mutual-aid principle
They provide funding to members predicated on non-
profit and mutual-aid principles.
Location of Shinkin Banks in Japan
全国 272 信用金庫分布図
（2010 年 3 月現在）

東京都

大阪府
 What Heroic episode of JRFI banker?
- Some actual episodes.

• - I decided the first loan for this company.

• - I helped this company from deep slump.

…not so much making big profit,
but that’s not problem.
New products being created by local high school students and businesses
as part of an entrepreneur contest organized by a Shinkin bank
Offering cooperative working spaces at Shinkin bank branches
Etiquette classes at a local junior high school
 How to develop the relationship?
- cover a narrow area with high density service.
(gather integrated information)
- customers are local companies and residents
(including potential future customers)
- bankers can also grow up by handling variety of industries
and difficult-to-pay-back clients
Part 3 :
A Proposal on the “i Bank Index” – A Measure
of Banks’ Ability to Nurture Client Businesses.

• The main objective is to measure banks’ capability to nurture

and develop client firms.
• It is natural to evaluate banks based on the degree to which
banks contributed to the growth and development of client
firms.
As of 2016, Japan’s Ministry of Finance operates a
supervision policy on banks that takes a special focus on
banks’ financial soundness with respect to the following 6
indicators.

1. Equity capital (As an early corrective measure)

2. Aggregate Risk Management
3. Profitability
4. Credit Risk
5. Market Risk
6. Liquidity Risk (Based on The Basel Committee on Banking
Supervision’s international standards)
“i Bank Index”

• The “i Bank Index” is defined as the difference between the

average for a specific indicator of management among a
bank’s client firms and the national average on the particular
indicator.

• The new index will highly value banks that are able to
improve the performance of client firms regarding the
particular indicator.
Outline of new index Contribution of banks to SMEs

Customer company All companies

Index A
Index A

Index A Index A
Money＋α

Index A Index A

Bank to be evaluated

New index

①Average gap Average Gap Average

②Year-over-year gap This year Gap Last year

 Index A: Various management indices can be selected

Example: Ordinary income increase rate, ordinary profit ratio of sales, capital adequacy ratio, number of
employees, number of bankruptcies, etc.

 All companies: range is freely selectable

Example: rural, prefecture, municipality, industry, etc.
 Effect of new index

〇 ◎
①Bank's "health situation"
②
Customer ②Customer's "health situation"（New index）
company

× △ → Assessment of corporate value of

bank by contribution to company.
①Bank

Application examples of new index

Publish to Market Visualization of corporate value

Comparison with competitors Options as "banks to grow customers"

KPI Research What kind of behavior will improve the company?

Self assessment Advancement of PDCA cycle

There are two kinds of banks – one with the ability
to pick winners and one with the ability to nurture
businesses.

Figure１Ability-to-pick Paradigm Figure２ Ability-to-nurture Paradigm

Equation: “i Bank Index”

1 n 1 m
IN P, t    Pi, t    P j, t  ・・・ （Equation１）
n i1 m j 1

IN P, t 2  IN ( P, t1)
IN ( P, t1, t 2)  ・・・（Equation２）
IN P, t1
 Part 4 : Final remarks
• It is necessary to recognize the cause and effect
relationship between banks’ activities and the
development of client firms.

• The activities of banks and motivation of

bankers are important to the development of
small and medium enterprises.
“i Bank index”
• A patent has been filed for the new bank evaluating model.
• Inventor: Kiyotsugu Yoshihara.
• Patent administrator: Kyoto University.
ありがとうございます。Thank you for participating.