Social Impact of Dormant Funds on Civil Society: International Comparative Studies

• In Event: A Comparative Research on Dormant Fund Schemes and Social Enterprises

Abstract

1. Introduction
In at least 20 countries utilization schemes of dormant funds (DF) have been used for various public purposes, from economic and social development, and rural revitalization to poverty reduction. In this paper we would like to focus on the roles of DF schemes in financially supporting the activities of social enterprises with public purposes. We would like to shed special light on 4 countries the UK, Ireland, South Korea, and Japan, all with their own DF schemes that independently run from their governments, while all 20+ countries were surveyed to get basic information for international comparison. We have gathered and analyzed annual reports, action plans, government documents about DF schemes in those countries, and other publicly available information as well as expert interviews. This comparative study could help to launch DF schemes in countries without the system at present.

2. Comparative profile of DF schemes
In Ireland, the DF scheme was introduced in 2001. Irish DF is designated to be used to assist economically or socially disadvantaged, educationally disadvantaged, and disabled. In Ireland according to Action Plan 2023, the total allocation from DF will be Euro 54.4 million (2.3 million for social enterprise, 3 million for senior alert scheme, 1 million for targeted social inclusion, etc.) in 2023. In the UK Reclaim Fund Ltd. administers a dormant account fund, then distributes the fund to four specialized distribution organizations based on the intended use, and the utilization is carried out through Social Investment Finance Intermediaries. In the UK total of GBP1.6 billion has been transferred from banks and building societies, then GBP800 million has been made available to social and environmental initiatives. In South Korea, over a hundred financial institutions lent dormant funds to self-employed individuals and social enterprises through nine designated private business execution institutions. Japan’s DF scheme basically employs a two-stage distribution system where funds in dormant deposit accounts are transferred dormant funds to the Deposit Insurance Corporation of Japan (DICJ), the DICJ then transfers dormant funds to JANPIA, then to several distributing funds organizations (DFO). DFOs then distribute grants to many implementing organizations. In Japan, while the amount of dormant deposits has been generated over JPY70 billion (equivalent to USD 0.5 billion) every year, only less than 10 % has finally been distributed to recipient organizations. Total annual disbursements per capita in three countries are USD12 in Ireland, USD14 in the UK, and USD0.4 in Japan. Since the amount of DF disbursement per capita in Japan is much less than in the UK and Ireland, this means that there may be much room for Japan’s DF scheme to increase disbursement.

3. Conclusions and policy implications
1) While Japan’s DF scheme has supplied funds to recipient organizations only in the form of grants, it would be effective to invest funds to social enterprises, since social enterprises can make a profit, and can pay return to investors. 2) Social impact measurement is important since the DF scheme is based on private funds originally from dormant assets, and disclosure of the results of impact measurement.

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Authors

• Asuna Umehara, Japan Institute for Public Policy Studies

• Ienori Tatefuku, Nihon University

• Naoto Yamauchi, JIPPS, Japan Institute for Public Policy Studies