Hometown investment trust funds: A stable way to supply risk capital

Naoyuki Yoshino, Sahoko Kaji

Research output: Book/ReportBook

9 Citations (Scopus)

Abstract

This book records the first success stories of a new form of financial intermediation, the hometown investment fund, that has become a national strategy in Japan, partly to meet the need to finance small and medium-sized enterprises (SMEs) after the devastating earthquake and tsunami in March 2011. The hometown investment fund has three main advantages. First, it contributes to financial market stability by lowering information asymmetry. Individual households and firms have direct access to information about the borrowing firms, mainly SMEs, that they lend to. Second, it is a stable source of risk capital. The fund is project driven. Firms and households decide to invest by getting to know the borrowers and their projects. In this way the fund distributes risk but not so that it renders risk intractable, which was the problem with the originate and distribute model. Third, it contributes to economic recovery by connecting firms and households with SMEs that are worthy of their support. It also creates employment opportunities, at the SMEs as well as for the pool of retirees from financial institutions who can help assess the projects. Introduction of the hometown investment fund has huge global implications. The world is seeking a method of financial intermediation that minimizes information asymmetry, distributes risk without making it opaque, and contributes to economic recovery. Funds similar to Japan's hometown investment fund can succeed in all three ways. After all, the majority of the world's businesses are SMEs. The first chapter explains the theory behind this method, and the following chapters relate success stories from Japan and other parts of Asia. This book should encourage policymakers, economists, lenders, and borrowers, especially in developing countries, to adopt this new form of financial intermediation, thus contributing to global economic stability.

Original languageEnglish
PublisherSpringer Japan
Number of pages98
ISBN (Print)9784431543091, 4431543082, 9784431543084
DOIs
Publication statusPublished - 2014 Nov 1

Fingerprint

Trust funds
Investment trusts
Small and medium-sized enterprises
Supply risk
Risk capital
Investment funds
Financial intermediation
Japan
Household
Information asymmetry
Economic recovery
Economic stability
Finance
Economists
Tsunami
Earthquake
Borrowing
Financial institutions
Politicians
Asia

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

Cite this

Hometown investment trust funds : A stable way to supply risk capital. / Yoshino, Naoyuki; Kaji, Sahoko.

Springer Japan, 2014. 98 p.

Research output: Book/ReportBook

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