NIKKEI ASIAN REVIEW – January 6, 2016 – TOKYO — Japan will support Southeast Asian nations in creating mechanisms by which governments can effectively guarantee loans, making it easier for smaller companies to round up funding for expansion into those lucrative markets.
Members of the Association of Southeast Asian Nations broadly agreed at working-level talks in November 2015 to gradually put credit guarantee systems into place. Japan’s Ministry of Economy, Trade and Industry looks to work with those countries to survey the current state of financing to small and midsize businesses within the bloc, potentially starting before the fiscal year ends in March.
The ministry will help create an ASEAN-wide database of small and midsize companies’ financial and other information. Easy access to that data will let credit guarantee associations and financial institutions more objectively assess companies’ creditworthiness. That key factor has so far been lacking in the region, walling off access to guarantees in most member states.
Experts will also be dispatched to each country to create research groups and otherwise lay the foundations for the systems, to be introduced over several years. Japanese as well as local companies are seen accessing guarantees across the ASEAN area as easily as in Japan, making fundraising in the region simpler.
Nationwide credit guarantee systems would allow governments to step in through guarantee associations and take over loans that companies are unable to repay. Such a mechanism would make it easier for financial institutions to lend to smaller companies by reducing the risk associated with default. In Japan, repayment of 80% of the debt is guaranteed as a general rule.
In light of the basic agreement reached by members of the Trans-Pacific Partnership free trade pact in October 2015, the economy ministry is working to push small to midsize companies to venture abroad. The ASEAN bloc boasts particularly high economic growth, making it a highly desirable destination.