The government will expand the maximum amount of credit guarantee to smaller businesses lacking collateral from the current 50 million yen to 80 million yen, International Trade and Industry Minister Takeo Hiranuma announced Tuesday.
The government will also raise the upper limit of credit guarantees up to 160 million yen to certain smaller firms that have had transactions with companies and financial institutions that have gone bankrupt or are on the verge of collapse, Hiranuma said.
The existing credit guarantee system was launched in March 1998 as a temporary measure to save smaller businesses when the country’s financial institutions severely tightened lending to those businesses amid financial turmoil. The scheme is to expire next March, after which the new scheme will be launched.
The existing scheme drew criticism that it could trigger a moral hazard among borrowers because it will allow smaller companies to borrow money without due screening of their business projects.
Hiranuma said the government will respond to such criticism by strictly checking each application. from those firms.
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