OSAKA -- The Osaka Prefectural Government announced Tuesday that it will set up a 50 billion yen bond market in September to enable small and midsize local firms having difficulty securing loans to raise funds.
The prefecture said it will be the second market of its kind set up by a local government in Japan after Tokyo came up with the idea in March 2000.
Both markets are designed to give small firms with high-quality technologies but no collateral a new source of fundraising.
Under each, financial institutions are asked to offer new loans to the firms. The loans are then pooled and securitized by special-purpose companies for sale as bonds to investors.
While the Tokyo Metropolitan Government guarantees bonds in its scheme, Osaka will not do so, Osaka government officials said.
"We will not spend any public money for our scheme, and private financial institutions will have to take all the risks," said Takashi Endo, an official in the Osaka government's financial services section.
Osaka plans to expand the market to between 100 billion yen and 200 billion yen in three years, the officials said. Tokyo's market is currently worth only 5 billion yen.
Osaka is negotiating with a domestic bank and a foreign brokerage house to arrange the details of the plan, which will be announced by the end of this month, the officials said. They refused to name the two financial institutions involved.
It plans to start accepting loan applications next month.