The Financial Services Agency envisions creating a new category of regional private-sector financial institutions whose functions will be limited to providing loans to small businesses and citizens in low-income brackets, according to FSA officials.
The FSA envisages getting the lenders to complement the lending functions of credit associations, known as “shinkin” banks, and credit unions that are finding it difficult to grant loan applications from such low-income people at a time when income disparities are expanding among citizens belonging to a range of income brackets, they said Thursday.
The FSA will seek views from a working group of the Financial System Council about the planned financial institutions. The agency will mention the idea of creating such lenders in an interim report it will submit Friday to the working group on cooperative financial institutions, they said.
The planned establishment of the lenders is intended to respond to anxieties that low-income borrowers are facing difficulties in taking out loans, as the Diet has stiffened a law governing consumer loan companies that levy exorbitant interest in view of the public outcry over the plight of borrowers indebted to multiple consumer lenders, they said.
The provision of credit to people in low-income brackets without having them put up collateral has been referred to by the term microcredit.
Grameen Bank of Bangladesh, whose founder Muhammad Yunus, a professor at the University of Chittagong, was awarded the Nobel Peace Prize in 2006, is renowned for the provision of this type of credit.
The FSA officials said the agency has come to envision creating a Japanese counterpart of Grameen Bank.
The agency intends to limit the new financial institutions’ functions to taking deposits and providing loans, while barring them from selling insurance policies and mutual funds, they said.
The agency envisions subjecting such lenders to much more lenient regulations than those governing the activities of credit unions and other types of relatively small lenders in drafting laws for governing the new category of lenders.
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