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Financial Education in Japan and
Financial Inclusion
Naoyuki Yoshino
Dean, Asian Development Bank Institute (ADBI)
Professor Emeritus, Keio University, Japan
[email protected] ADBI-Japan-OECD High-level Symposium: “Promoting Better Lifetime Planning
through Financial Education”
22-23 January 2015, Tokyo
Outline 1, Bank dominated asset allocation
2, Financial Education to prepare for Ageing
3, Financial Education in Schools in Japan
Survey to 4462 teachers
Promotion of Financial Education, Council
4, Loan Sharks (Money Lenders)
5, SME (Small enterprises) education in finance
6, Hometown Investment Trust Funds
7, Macroeconomics Effects of Financial Education
2
Cash ans Deposits, 567
Insurance and Pension Funds,
1049
Securities, 782
Stocks, 1170
Others, 147
USA
Total, 3715
Cash ans Deposits,
792
Insurance and
Pension Funds,
399
Securities, 92
Stocks, 87 Others, 58
Japan
Total, 1428
Cash ans Deposits,
221
Insurance and
Pension Funds,
189
Securities, 103
Stocks, 44
Others, 5
Germany
Total, 562
Households’ Asset Allocation Hometown Investment Trust Funds, 2013, Yoshino and Kaji, Springer
Bank-Dominated Financial Systems and the Economic Importance of SME
4
Population Ageing of Japan
5
(Dividends & Interest receipt)/(Income) Yoshino & Kaji (2013) Hometown Investment Trust Funds, Springer
Germany
UK
USA France
Japan
Financial Education to prepare for old age
1, Government Support --- Pension System
401K (Self protection for asset allocation)
2, Life Insurance --- long term savings by individuals
3, long term institutional investors
infrastructure investment (long-term funding)
4, Various financial products will be sold in Asia
5, Risks and Returns, individual financial education
Financial Education in Schools (Japan)
1, Secondary School (7th-9) and High School (10-12th)
taught in the courses of “Civics, Home-economics”
Many teachers are not well trained in the subject.
2, Financial education in Japan’s primary school
is taught at “Home making courses”.
3, Very few hours are allocated to financial education
4, It is regarded as a shame to make money
by financial investments.
5, Retiree from financial institutions could teach
financial economics to students. Video lectures 8
9
10
Why is it difficult to teach ? 4462
11
Financial Education Promotion Council What kind of subjects and items should be taught
at each level of school education ?
Chair Person, Naoyuki YOSHINO Central Bank of Japan Financial Services Agency (FSA) Ministry of Education Consumer Protection Agency (Government of Japan) Bankers Association of Japan Securities Dealers Association Insurance Association Trust Bank Association Investment Trust Association Financial Planners Association
12
Number of Households’ Default
13
(件数)
240,000
220,000
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0 1990年 1992年 1994年 1996年 1998年 2000年 2002年 2004年 2006年 2008年 2010年 1986年 1988年
1991年 1993年 1995年 1997年 1999年 2001年 2003年 2005年 2007年 2009年 1985年 1987年 1989年
New Law – Microcredit Regulation consumer education
1, Total Amount of Borrowing < 1/3 of Income
2, Ceiling Interest Rate = 20%
more than 96% 29% 20%
3, Borrowers Information
Aggregated total individual borrowings
4, Paper examination to be a lender
5, Minimum capital requirement
6, Consumer complaints and advices 14
15
SMEs in Japan
SMEs in Thailand
16
SMEs (14.4million
data)
Defaults
(1.7million
data)
Financial
Institutions
200 Regional Banks
Credit Associations
Credit Cooperatives
Government Banks
Central Bank
Credit Guarantee
Corporations (Collect Data of SMEs)
52
1, Government Support
2, Reliability
3, Security of Information
CRD
SME Data base (CRD Data base)
17
There are 4 accounts by SMEs in Japan
1, Account to show bankers
2, Account to show Tax authority
3, SME owner’s own account
4, Account to show to his wife
18
19 Note: Ebit denotes Earnings Before Interest and Taxes
• 1363 SMEs of one Asian bank examined
• 11 most significant ratios(variables) selected
20
Cluster analysis: the average linkage method
21
Healthier Group
of SMEs
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
-1.5 -1 -0.5 0 0.5 1
Z2-Z3 Group B
0
2
4
6
8
10
12
14
-1 -0.5 0 0.5 1 1.5
Z2-Z3 Group A-1
0
5
10
15
20
25
30
0 1 2 3
Z2-Z3 Group A-2
Financial Education for SMEs
1, Book Keeping
2, Daily revenue and expenses
3, Long term thinking
4, Accurate reporting of their business
5, Reduce default loan losses
6, Reduce information asymmetry
22
23
Start up businesses and SME financing by Hometown Investment Trust Funds
1, Bank Loans --- relatively safer borrowers
2, Hometown Investment Trust Funds -- SME
E-Finance, E-Fund Banking
Account
Hometown
Investment
Trust
Funds
Riskier Borrowers
Investors
Depositors
Safer borower
Banking
Account
Risks and Returns Financial Education
1, Hometown Investment Trust Funds
Supply of risk capital in rural region
Basel Capital Requirements -- safer borrowers
2, Agricultural farmers
3, Small business, Start-up companies
4, Individual Investors in the region
Mutual assistance, Creation of jobs
25
Donation and Investment to community
26
Agricultural Funds Beans and Wine
Dec 11 2013 , Tehran – I.R. of IRAN 27
28
Investors Community Type Infrastructure SME Hometown Trust Fund
Wind power Generator Funds
Japanese Wine Fund
Local Airport
Agricultural Sector
Large Projects and Professional Investors Pension Funds (Financial Education)
Insurance companies
Mutual Funds
Macroeconomic Effects of Financial Education
(1) Hoseholds’ Asset Allocation (Diversification)
Y-S = S + C = (D + B) + C …………(1)
(2) Aggregate Supply Curve (SME and corporation)
Y-Yf = a1(Pe-P) + a2 L + a3 (B + v) …………..(2)
(3) Aggregate Demand Curve (Corporate fund raising)
Y = b1 + b2 L + b3 (B + u) + b4 G ……………(3)
Increase of Expected Outputs
dE(Y)= -b2 dE(S) + b3 (dE(S) + du) ……………..(4)
Risks V(y) = b3 V(S+u) …………….(5) 30
Transmission of Financial Education
1, Efficient allocation of assets by households
2, Long term perspectives of households
3, Enhance wellbeing of individuals
3, Diversify corporate fund raising
4, Efficient cash management of corporation
5, Transparency of SMEs (Small enterprises)
6, Promotion of start up businesses
7, Enhance Economic Growth
8, Efficient time allocation of financial institutions
31
32
References McNelis, P. and N. Yoshino (2012) "Macroeconomic Volatility Under High Accumulation of Government Debt: Lessons from Japan", Advances in Complex Systems, Vol. 15, Suppl. No. 2. Yoshino, Suzuki, Maehara and Abe (2009) Development of Corporate Credit Information Database and Credit Guarantee System, ASEAN Secretariat, Feb. 2009. Yoshino, N. (2010) “Financing Transport Infrastructure Development in Southeast Asia” OECD, Southeast Asian Economic Outlook, 2010, Nov., Chapter 6, OECD, Paris. Yoshino N. (2012) “The Global Imbalance and the Development of Capital Flows among Asian Countries”, OECD Journal: Financial Market Trends, Volume 1, 2012 Yoshino N. Kaji, S. (2013) Hometown Investment Trust Funds, Springer, March 2013 Yoshino N. Taghizadeh-Farhad (2014) “Hometown Investment Trust Funds: An Analysis of Credit Risk” Working Paper, Asian Development Bank Institute (ADBI), No.505, November 2014