Amid the COVID-19 crisis, a growing number of social welfare councils in Japan have been restricting their provision of new loans offered to households under a special government program for those suffering reduced income, it has been learned.
“Social welfare councils aren’t catching up with” a surging number of applications for such loans, an official of a support group for needy people has said. The number of loan applications has risen some 170-fold from the level seen before the outbreak of the novel coronavirus pandemic.
Living expense support was designed mainly for low-income earners, but the welfare ministry expanded the scope of the program in March last year as a special measure to support households seeing their income reduced due to impacts of the virus crisis. The program gives such households access to interest-free loans without a guarantor.
“I felt extremely uncomfortable because I was asked about the job histories of my family members for some 2½ hours,” said a man in his 40s in the city of Yaizu, in Shizuoka Prefecture. He applied for a total of ¥600,000 in loans from a local social welfare council as amid the virus crisis he found he did not have as much work as before.
An official at the council initially told him that only ¥120,000 would be extended. The official also advised him that if he was unsatisfied with the loan amount he could withdraw the application and apply for public welfare benefits.
The man said that after he pointed out government guidelines saying that the amount loaned would not be determined by the amount of income lost, the official reluctantly accepted his application for the desired loan amount.
According to the ministry, the number of loan applications had stood at around 10,000 a year before the special measure was introduced in response to the pandemic. By about 11 months after its introduction, the number of applications had surged to 1.7 million.
The pace of growth in loan applications has accelerated since a second state of emergency over the virus was declared in January of this year, according to the Japan National Council of Social Welfare.
But in some cases, support staff who do not have adequate knowledge are having to deal with loan applications due to a shortage of labor. Also, it sometimes takes several months for applicants to receive loans due to a screening backlog, the council said.
A nonprofit organization in Saitama Prefecture that supports people in need has received some 300 inquiries a month from people seeking advice on problems related to loan applications and screening.
Takanori Fujita, a senior official at the organization, said that some social welfare councils are screening loan applications strictly due to concerns over applicants’ capability to repay them.
“Social welfare councils are acting like financial institutions, forcing loan applicants into a corner,” he said. “They (social welfare councils) should provide advice on repaying loans when repayment deadlines come.”
In a document, the ministry has notified social welfare councils that it is important to extend loans of the necessary amount promptly.
“It is inappropriate to conduct machine-like screening of loan applications,” the ministry said, expressing its wish for flexible responses by social welfare councils.
An official at the ministry’s division for helping needy people become financially independent said that the ministry will ask social welfare councils to take corrective steps if any improper operation of the loan program is found.
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