User:誤字直し/Credit Guarantee Corporation

The Credit Guarantee Corporation (Japanese: 信用保証協会, romanized as "Shin'you Hoshou Kyokai," and referred to as "Credit Guarantee Corporation" in English) is an authorized corporation established under the Credit Guarantee Corporation Law (Law No. 196 of 1953), and it is categorized as a public interest corporation listed in Appendix 2 of the Corporation Tax Law. The corporation aims to facilitate the smooth financing of small and medium-sized enterprises (SMEs) by guaranteeing their debts when obtaining loans from local financial institutions.

Overview:
Generally, when small and medium-sized enterprises seek loans from local financial institutions such as banks, their growth prospects and business risks are greater compared to large corporations. As a result, SMEs often face difficulties in obtaining loans or are disadvantaged in terms of loan amounts and conditions. To address this issue and enable SMEs to access funding more smoothly, the Credit Guarantee Corporation provides credit guarantees (guarantee commitments) to financial institutions based on agreements with SMEs. This practice complements the creditworthiness of SMEs, which may be inferior to that of large corporations in terms of fundraising, and acts as a bridge between SMEs and financial institutions to facilitate funding. Based on the credit guarantees provided by the corporation, financial institutions provide loans to SMEs, and in return, the Credit Guarantee Corporation receives guarantee fees from the borrower's business.

If the guaranteed company becomes unable to repay its debt for some reason, the corporation conducts subrogation repayment to the financial institution upon their claim. This allows the corporation to acquire the right to seek repayment and to recover the debt, including late payment damages, from the guaranteed company or joint guarantors. In cases where subrogation repayment is executed, it falls under the definition of an insurance incident according to the Small and Medium-sized Enterprise Credit Insurance Law, and 70%, 80%, or 90% of the subrogation repayment amount is paid as insurance money by the Japan Finance Corporation (formerly Small and Medium Enterprise Finance Corporation).

Amid this framework, an important consideration arises: Japan's SMEs have often persisted without undergoing necessary eliminations, as companies that should have been phased out continue to receive financing through the credit guarantee system. This phenomenon has led to their survival in an unhealthy manner, contributing to the country's low productivity.

The Credit Guarantee Corporation has one association per prefecture, and there are also credit guarantee associations covering Yokohama, Kawasaki, Nagoya, and Gifu cities. In total, there are 51 credit guarantee associations nationwide.

As a related company, the Credit Guarantee Association Debt Collection Corporation (commonly known as "Guarantee Association Servicer," permit number No. 47) exists, which undertakes debt collection from the Credit Guarantee Corporation. However, there have been cases of cancellations of appointments to the same company since 2018.

Similar public credit guarantee systems are adopted in countries such as the United States, the United Kingdom, Germany, France, Italy, Canada, South Korea, and Taiwan.

Relationship with SME Credit Insurance:
The Credit Guarantee Corporation has entered into a reinsurance contract (SME Credit Insurance) with the Japan Finance Corporation. Consequently, the corporation pays insurance premiums based on the guarantee contract amount and receives insurance money (partial fill-in) multiplied by a predetermined percentage in the event of subrogation repayment.

Joint Guarantor Issue:
The Credit Guarantee Corporation has required third-party joint guarantors. Consequently, family members of business owners are often chosen as joint guarantors, leading to a social issue. In response to this, the Small and Medium Enterprise Agency issued a notice titled "Prohibition of the Principle of Demanding Third-Party Guarantors in the Credit Guarantee Association" on March 31, 2006.

Criticism of Amakudari Organizations:
There is criticism that the positions of presidents and directors of 96% of the 52 credit guarantee associations nationwide are occupied by former local government officials through amakudari (the practice of retired bureaucrats taking up high positions in private-sector organizations).

History:
1937: The Tokyo Credit Guarantee Association, a non-profit organization, is established ahead of the entire nation.

1939: The Kyoto Credit Guarantee Association, a non-profit organization, is established.

1942: The Osaka City Credit Guarantee Association, a non-profit organization, is established.

1947: The Yokohama Credit Guarantee Association, a non-profit organization, is established.

1948: The Cabinet decides on the "Guidelines for SME Financial Measures." After this point, credit guarantee associations are established across the country.

1953: The Credit Guarantee Corporation Law, the foundation law, is promulgated and enforced.

1955: The All Japan Credit Guarantee Association Federation, a non-profit organization, is established.

1958: The Small and Medium Enterprise Credit Insurance Public Corporation is established.

1965: Special Small Amount Insurance and Unsecured Insurance are established.

1981: Due to a sharp increase in subrogation repayment cases, the Ministry of International Trade and Industry issues a notice on the "Sound Operation of the Credit Supplement System."

1986: Systems such as the Overdraft Principal Guarantee System (TOU-KAI) are established.

1998: The Special Guarantee System for the Stabilization of SME Financing (Stabilization) is established.

1999: The Small and Medium Enterprise Credit Insurance Public Corporation is integrated, and the Small and Medium Enterprise Agency is established.

2000: The SME Specific Bonds Guarantee System is established.

2001: The Accounts Receivable Secured Loan Guarantee System (Receivable Bonds) is established.

2003: The Working Capital Smooth Financing Guarantee System is established.

2004: The credit insurance division of the Small and Medium Enterprise Agency is integrated into the Small and Medium Enterprise Finance Corporation.

2006: Implementation of flexible credit guarantee fee rates, establishment of nationally unified application forms, revision of third-party guarantor handling, and changes to the handling of Overdraft Principal Guarantees are implemented.

2007: The Accounts Receivable Secured Loan Guarantee System is expanded to include the Asset-Based Loan Guarantee System (ABL Guarantee).

2008: The Small and Medium Enterprise Finance Corporation is integrated with the Japan Finance Corporation.

2008: The Emergency Guarantee System is established.

2010: The Emergency Guarantee System for Economic Measures is established.

2011: The Emergency Guarantee System for the Restoration of the Great East Japan Earthquake is established.

2013: The Management Strengthening Guarantee System is established.

2014: The application of guidelines related to management guarantors begins.