Feature Article JAPANESE REGIONAL BANKS TAKE ON THE WORLD
Regional banks, with deep roots in their respective communities, and JBIC, with its overseas network, complement each other’s strengths.
Collaboration between JBIC and regional banks goes beyond the provision of various financial support to cover a range of areas from the provision of local information to personnel exchange programs.
Confronted by Japan’s declining population, support for overseas expansion is a valuable initiative for all three parties: JBIC, regional banks, and companies.
“It may be difficult to imagine from our name, but we are also focused on strengthening partnerships with regional banks across Japan,” says INOUE Makiko of JBIC’s Finance Office for SMEs, who works with companies in eastern Japan on overseas expansion.
ARITA Junsuke of JBIC’s Osaka Branch, who has the same role with regional banks in western Japan, echoes her views, “Cooperation with regional banks is indispensable in supporting local MTEs and SMEs in expanding their business overseas.”
(left) INOUE Makiko, Director, Division 2, Finance Office for SMEs, Industry Finance Group, JBIC
(right) ARITA Junsuke, Director, Finance Division for SMEs, Osaka Branch, Industry Finance Group, JBIC
Local companies trust regional banks, JBIC has overseas expertise and knowhow
With the growth of emerging economies, particularly in Asia, there is an increasing need for not only large corporations but also MTEs and SMEs to expand their businesses abroad. Making up more than 99 percent of Japan’s companies, many of these MTEs and SMEs are based in regional areas. Supporting the overseas expansion of these companies, which vary widely in their industry, size, and operations, requires cooperation with regional banks. These banks have built up long-standing relationships and deep knowledge of local companies.
According to INOUE, “The technologies and quality of Japanese companies are highly regarded abroad. Regional banks know these companies well, understanding the challenges they face and the solutions they need. By combining the strengths of regional banks with JBIC's expertise and networks for overseas projects, we can meet the needs of MTEs and SMEs.”
“I want to help send out local companies with superb but still globally obscure technologies into the world through support provided by regional banks, which are rooted in the community,” says INOUE Makiko with a smile.
Indeed, in addition to the usual co-financing schemes and local currency-denominated loans, JBIC has developed financial support measures for locally-based MTEs and SMEs through two-step loans provided by regional banks. The number of regional financial institutions (with account balances) that have co-financed MTEs and SMEs has more than doubled over the past 10 years to 52 as of the end of March 2024. JBIC is now cooperating with Japanese regional banks from Hokkaido to Kyushu.
JBIC not only provides loans, but a range of support for MTEs and SMEs, including overseas investment seminars, information on the investment landscape, and legal and tax accounting advisory services. And with representative offices in 18 locations around the world, JBIC can also provide tailored advice based on local information.
“The support provided by our representative offices plays an important role, especially because many of the regional banks have a limited overseas presence. I believe that the value of collaborating with us is quite clear,” says INOUE.
There are also personnel exchanges between JBIC and regional banks. Staff seconded to JBIC learn the skills and knowhow needed to implement overseas projects, invaluable experience for when they return to their banks.
ARITA describes how important this is, “Personnel are usually seconded to JBIC for a period of two years, but there are many regional banks that renew this assignment period and have their staff continue on with us. JBIC also benefits because when these individuals return to their banks, they can serve as our counterparts for overseas projects and help facilitate the collaboration between JBIC and the respective banks.”
Through co-financing between JBIC, regional banks, and other institutions, such institutions with account balances grew from 21 at the end of FY2013 to 52 at the end of FY2023.
Growing expectations for the Indian market and
a broader range of companies expanding overseas
The types of companies supported through cooperation between JBIC and regional banks reflect the industrial structure of Japan. Until recently, the majority were in the manufacturing sector. But due to the evolving domestic industrial structure, they have been joined by service sector businesses such as food and beverage companies.
Although many of the MTEs and SMEs are expanding into Southeast Asian countries such as Thailand, Vietnam, and Indonesia, consultations concerning expansion into India have recently been increasing.
ARITA notes, “It seems that an increasing number of MTEs and SMEs feel that they will eventually have to enter the Indian market. No regional bank has an office in India, but JBIC has a representative office in the capital, New Delhi, and can flexibly provide loans in local currency. We expect that collaboration in India will increase as well, with regional banks handling companies’ needs and JBIC providing the necessary support.”
“Many executives of MTEs and SMEs commit not only to the management of the company but also the life of their employees and families. I am very lucky to be able to meet people who have such a commendable attitude toward life through my work with regional banks,” says ARITA Junsuke.
Regarding the importance of cooperation with regional banks, INOUE stresses that “In light of Japan’s rapidly declining population, the growth of companies of all sizes will be limited if they just operate domestically. Regional banks, which serve as their main banks, also need to look beyond their domestic business to overseas markets. I feel that there is enormous value in using JBIC’s resources to support both sides in their earnest efforts to grow. Including JBIC, I believe this is a meaningful initiative for all three parties.”
ARITA adds, “Support for MTEs and SMEs through regional banks requires handling many projects in a short period of time. The finance arrangement required varies from project to project, and always needs both tangible and intangible customization. The learning experience gained through such collaboration with regional banks is invaluable in the project development process and helps enhance JBIC's local understanding and response capabilities.”
There are also numerous companies that had a successful experience through the collaborative support by JBIC and regional banks, and want to use the scheme again. As Japan’s policy-based financial institution, JBIC will continue to strengthen its partnership with regional banks and provide financial support to the overseas business development of Japanese companies, including MTEs and SMEs.
Director
Division 2, Finance Office for SMEs, Industry Finance Group
INOUE Makiko
Joined the bank in 2007. Following assignments including the Osaka Branch, Credit Department, and Administration and General Services Department, was assigned to the Finance Office for SMEs in October 2019, and assumed her current position in November 2023.
Director
Finance Division for SMEs, Osaka Branch, Industry Finance Group
ARITA Junsuke
Joined the bank in 2008. Following assignments including the Americas Finance Department, Mining and Metals Finance Department, and Corporate Planning Department, assumed his current position in June 2021.
