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Effects of Dormant Fund Utilization Scheme on Financing Social Sector in Japan

Tue, July 16, 12:00 to 1:30pm, TBA

Abstract

1. Introduction
One of the major issues for the development of the social enterprise sector is financing, as venture capital has not been developed well in Japan. The utilization scheme of dormant account funds (DF, hereafter) has been established and operated in Japan since 2019, and this scheme can indeed be a possible financial source for the social enterprise sector. A quick literature review shows that so far almost no research on Japan’s DF scheme, except by Baba et.al. (2022) and Takamiya (2021). We are eligible to use the latest dataset on the allocation of funds of DF to various social projects and uncover possible impacts of the DF scheme on the activities of social enterprises. One of our research questions is whether the DF scheme be more effective in supporting the growth of the social enterprises sector if loan and investment schemes as well as grants were introduced.

2. Data Analysis and discussion
In 2019 utilization scheme of DF was launched, and JANPIA, Japan Network for Public Interest Activities was founded as a designated utilization organization. Funds in dormant deposit accounts (inactive more than 10 years) of commercial banks are transferred dormant funds to the Deposit Insurance Corporation of Japan (DICJ), the DICJ then transfers dormant funds to JANPIA. JANPIA is designated to disburse funds to several distributing funds organizations (DFO). DFOs then distribute grants to many implementing organizations. Thus, Japan’s DF scheme basically employs a two-stage distribution system. In 4 years since 2019, the total number of accepted projects was 152 out of 375 total number of applications. Acceptance rate was 40.5%. The total amount of the grant was JPY21.8 billion (approximately USD14.6 million). The average grant size per program was JPY143 million, ranging from JPY13 million up to JPY508 million. In the same period, the number of programs was 966. Out of these 404 (41.8% of the total) were implemented by SNPCs (specified nonprofit corporations), 166 (17.2%) were implemented by general incorporated associations, while only 93(9.6 %) were implemented by for-profit joint-stock corporations. In the same period, the distribution of programs by 4 (5 if we account for COVID-19-related) types of programs was interesting. JPY8.7 billion (40.1% of the total) was allocated to covid-19 related, JPY7.4 billion (34.2% of the total) was allocated to grassroots activity support programs, whereas only 1.6 billion (7.5% of the total) was allocated to social business creation support programs.

3. Conclusion and suggestions
Since Japan’s DF scheme is a latecomer following Ireland, the UK, South Korea, and others, it is worth introducing some advanced systems to Japan. 1) A dormant deposit account search system where depositors can easily find their account has to be introduced in Japan like in other countries. 2) Public relations on the DF scheme are far from sufficient compared to other countries, namely Ireland and the UK. Detailed disclosure is indispensable to media, academia, and watchdog nonprofits. 3) For further development of the social enterprise sector, loans and investments should be added on top of traditional grants.

References for Paper 2
Baba, Hideaki, Aoki Takahiro, Juntaro Konno, 2022, Utilization of dormant deposit to loan and investment, Kansai University Journal of Commerce, No.2, Vol.64, pp.43-56.
Deposit Insurance Corporation of Japan, 2023, Statistics on dormant deposit related figures. https://www.dic.go.jp/content/000029913.pdf.
JANPIA, 2022, Databook on dormant deposit utilization scheme https://www.janpia.or.jp/about/information/pdf/plan/2021_plan_02.pdf.
Takamiya, Saki, 2021, Utilization of dormant deposit in Japan and overseas, Business Environment Report, December 2021, Dai-ichi Life Research Institute.

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