Japan pushes for annual ¥80bn dormant accounts cash to go to social investment funds
Version of UK’s Big Society Capital proposed to funnel money into finance projects.
A group of members of Japan’s legislative house, the National Diet, are seeking to secure a draft law to use dormant bank accounts to set up a Big Society Capital-style organisation in the country in a move that could transfer more than €500m per annum into the social investment sector.
Big Society Capital is the UK’s pioneering social financial institution that was launched with a £600m (€767.7m) investment fund in April 2012 from dormant bank accounts. It acts as a wholesaler that makes loans to or invests in social sector organisations.
The group of Japanese politicians that are pushing for a Japanese version is called the Group of Councillors for Utilization of Dormant Bank Accounts. It includes Shiozaki Yasuhisa, president of the governing Liberal Democratic Party (LDP), and Furukawa Mothisa, acting president of the Democratic Party of Japan (DPJ).
Yosuke Ishikawa, who works at the general planning section at the Nippon Foundation, a grant-giving organisation, is acting as the secretariat for a group of Japanese NGOs, social businesses, consultants and lawyers who lobbied the councillors to use dormant accounts to set up a social investment bank. Nippon Foundation’s Executive Director Shuichi Ono sat on the Japan National Advisory board for the G8 Impact Investment Taskforce led by venture capital and social finance pioneer Sir Ronald Cohen.
Speaking to Responsible Investor, Ishikawa said the coalition of Japanese politicians seeking to secure legislation on dormant accounts included all major parties.
He said the draft law was written and now has to go through some internal meetings of the LDP. If it passesthese meetings, it will be submitted to the Diet and if successful should be passed into law during this term, which will end on the 27th of September.
The draft law says that dormant accounts money, estimated to be 80bn yen (€588m) a year, should be transferred to a foundation independent from government which will give out loans and grants to support three main areas: the poor and needy, children and young people, and rural areas. The law also states the Cabinet Office can announce new areas of support going forward.
Ishikawa said he hoped getting the law to pass would be a smooth process, but there would be some obstacles. “Some experienced Diet members do not think this is a good idea,” he said. “We still have some lobbying to do.” But he added that some big names were keen on the idea, most high profile being, Yoshihide Suga, Minister of State, Chief Cabinet Secretary.
The Nippon Foundation is also looking at developing social impact bonds, but this is very early stage.
Japan’s social finance market – often referred to as Base of the Pyramid finance – is one of the world’s most active and fast growing.
A report by the Japan National Advisory to the G8 Impact Investment Taskforce in 2014 put the size of social finance investment in Japan at US$247.7m with an additional $500m+ in impact investment bonds that often fund overseas aid projects. It said social finance in Japan had recorded significant growth this decade due to heightened interest from the public and the private sector after the March 2011 earthquake and tsunami.