The world’s third-largest economy might not seem the obvious place to find the need for microfinancing, but for businesses in tsunami-ravaged northeast Japan, it could be the key to revival.
Music Securities, a brokerage more used to raising cash for struggling musicians, has turned its expertise to building bridges between small businesses in the disaster zone and people with cash who want to help.
The model is based on that developed by Grameen Bank in Bangladesh, where small loans on easy terms are offered to the nation’s poor, with an emphasis on growth potential rather than creditworthiness.
The program and its founder, Muhammad Yunus, won the 2006 Nobel Peace Prize for the scheme, which allowed individuals to work for their living to regain their dignity.
In Japan, investors with as little as ￥10,000 (US$77) to spare are helping to rebuild enterprises as diverse as cafes, seafood producers and a 200-year-old soy sauce factory.
Alongside household names such as Toyota which suffered when the March 11 tsunami shattered their supply chains or knocked out their factories, hundreds of family-run businesses were also badly hit.
However, unlike multinational car companies, these small businesses have neither deep enough pockets nor the available lines of credit to get back on their feet.
“This is an area where public assistance has been insufficient, and where it is difficult for existing financial institutions to enter,” said Masami Komatsu, chief executive of Tokyo-based Music Securities.
“But, there is a desperate need for capital in the region. There are so many good businesses out there who could use help,” he said.
Some of those who ran businesses in the Tohoku region of Japan lost almost everything — houses, factories, inventory and even their skilled workers — when the monster waves roared ashore, claiming 20,000 lives.
With existing debts and nothing to offer as fresh collateral, even farmers with generations of success behind them have found it all but impossible to secure bank loans.
However, with the skills and a solid business plan to rebuild and to expand, all that is needed is capital to renew factories, to purchase freezers and to build greenhouses.
Under the scheme, investors offer cash in increments of ￥10,000, with ￥5,000 an investment and the remainder a donation that will not be returned.
Music Securities lets investors choose from a expanding catalog of small businesses in Tohoku.
Those businesses promise to return the investment in a decade or less in addition to extra financial returns if they have commercial success.
As of early this month, 28 enterprises had collectively asked for more than ￥900 million through Music Securities, and raised around ￥455 million from more than 13,500 investors.
Among them is farmer Seiichi Seto, 62, who lost family members, his house and many of his fields to the tsunami.
He has joined forces with two friends to raise ￥40 million to start a hydroponic vegetable farm in Sendai.
“Unless I do something I cannot put food on the table. Financial institutions and farmers’ cooperatives don’t lend us money,” said Seto, who has already persuaded major restaurant chains to buy his vegetables once his new farm becomes operational.
“I want to create stable jobs and provide a stable income,” he said.
Seitoku Iwai is trying to re-establish his shop selling sake and porcelain in hard-hit Rikuzentakata, a city that was largely destroyed by the tsunami.