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Factoring in Japan

Factoring in Japan. October 24, 2003 Yasuo Izumi The World Bank. Factoring - Development. First Factoring Companies were Created in mid-1970s Rapid Growth in 1990s during the Full Deregulation Introduced in 1993 for Financial Sector

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Factoring in Japan

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  1. Factoring in Japan October 24, 2003 Yasuo IzumiThe World Bank

  2. Factoring - Development • First Factoring Companies were Created in mid-1970s • Rapid Growth in 1990s during the Full Deregulation Introduced in 1993 for Financial Sector • New Entrants from Non-Banking Sector (NBFIs, Insurance, Mfg Companies, etc)

  3. Factoring - Recent Trend Source FCI Annual Report 2002

  4. Factoring - Key Players • Banking Groups – 4 Major Groups (as FCI Members) • Insurance Company Groups • NBFIs – Leasing Companies etc. • Large Manufacturing / Distribution Groups • Independent Financial Boutiques

  5. Factoring - Infrastructure • Credit Information System – Yes • Functioning Payment System – Yes • Efficient IT System – Yes, but more… • Legal Framework – Yes • Conducive Taxation – Yes !! • FX Licensing – No need • Credit Insurance – Yes

  6. Key Feature – Fin Sec 1 • Downsizing / NPL Issues (1990s -) - Strong Need for Asset Mobilization • Deregulated Financial Sector - Active to New Financial Instruments • Finance Resource is Abundant - New “Intermediaries”

  7. Key Feature – Fin Sec 2 • “Bills Discounted” - Popular Working Capital Funding • Collateral Arrangement - Always “The Issue” for SMEs, Start-ups

  8. Key Feature – Enterprises • Unattractive “Bills Discounted” Loan- Promissory Note Stamp Duty- Administration of Prom. Notes - With Recourse Funding • Seeking a Better SCM on IT- from Procurement, Manufacturing to Distribution & Sales AND Financial Mgt

  9. Key Feature – LEs/SMEs • Double Layer: LEs Dominant Position - Large Enterprises (0.3%) vs. SMEs (99.7%) of over 3 million Companies • Strong Drive for LEs to Use Factoring with SME Suppliers and Distributors- Outsource Procurement & Sales Mgt (time saving / credit mgt / fin cost …)

  10. Key Feature – SMEs • Many Financial Schemes offered to SMEs - Factoring is an Option but Attractive • Traditional Working Capital Funding • Account Receivables Securitization • Credit Insurance for SMEs

  11. Factoring – New Waves • As a Part of SCM System- Procurement to Sales Management AND Financial Management • Insurance Scheme with “Factoring”- Insurance Companies & Factoring Companies • E-Factoring - with Strong IT Infrastructure

  12. Yasuo IzumiSector ManagerPrivate and Financial Sector DevelopmentEurope and Central AsiaThe World Banke-mail: YIzumi@worldbank.orgtel: 202-458-7615Personal Website: www.YasuoIzumi.com

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