The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank

Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the
accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be
consistent with ADB official terms.

Towards Future of SME Lending in Japan

Toshio Taki
Board Director, Head of Fintech Institute
Money Forward, Inc.

29-30 October 2018

Our Corporate Mission/Vision/Value 1
We alleviate individuals’ concerns and insecure feelings about personal
finance, boost businesses’ growth potential, and aspire to become largest
financial platform in Japan.

Mission Vision Value

Money Forward. Becoming the financial User Focus
Move your life forward. platform for all. Technology Driven
Fairness

‘Money’ may be nothing more than a tool for living. However, money is also essential for guarding ourselves
and our families, as well as for realizing our dreams.
Money Forward, Inc. contributes to building a better society by providing services that enable users to “see
money in a positive light and broaden their range of opportunities,” thereby significantly enriching their lives.
Mainstay Services 2
We provide various B2C and B2B services.

B2C Area B2B Area

PFM
PFM*1 Services MFCloud
MF CloudServices
Services

“MF Cloud”
SaaS platform for businesses
Automated PFM Service
MF Cloud Accounting / MF Cloud Tax Return
MF Cloud Invoice / MF Cloud Payroll
MF Cloud Expense / MF Cloud Reconciliation
Practical Economic Media MF Cloud My Number / MF Cloud Finance

Platform for comparing/ Automated Cloud-based

registering to financial services bookkeeping service business analysis software

New Services

Automated savings app Financial consultation desk Inter-company post-pay settlement service

*1 PFM: Personal Financial Management

*2 SaaS: Software as a Service
Money Forward—Automated PFM Service 3
Money Forward has the top share in PFM apps. The number of users
exceeded 6.5 million, with one out of every four PFM app users now using
Money Forward.
No.1* coverage: links with 2,650+ financial services/
Automatically creates household accounting books by
aggregating multiple accounts No. of users and market share

No. of users

Securities
Credit card
Miles

Bank Online shopping

Electronic money
Mobile phone
Pension Market share

Automatically
Connects
classifies
Visualizes Source: Mar. 23 to 27, 2017, Rakuten Research, Inc.,
“PFM app currently used”
** Based
Based on
on research
research by
by Money
Money Forward,
Forward, Inc.
Inc. as
as of
of June
Sep. 30,
29, 2018
2017 Survey targets: 685 PFM app users in their 20s to 60s
MF Cloud Series—SaaS Platform 4
The MF Cloud Series is a SaaS-type service platform for businesses
providing comprehensive services for back office operations.

MF Cloud Accounting/Tax Return, MF Cloud Invoice, MF Cloud Payroll,

MF Cloud Reconciliation, MF Cloud My Number,
MF Cloud Expense, MF Cloud Finance
Tapping into the dissemination of cloud computing, we provide systems that would usually require large
initial investments in the form of SaaS, thereby offering the benefits of IT to all businesses ranging from
small businesses to large enterprises.
MF KESSAI—Inter-company Post-pay 5
Settlement Service
MF KESSAI is a smart invoicing and settlement processing service released
in June 2017 which enables companies to improve their cash flow.

1. Inputting sales record 2. Credit screening 3. Sending invoice

Credit screening can be completed in a MF KESSAI issues and sends

Seller inputs sales record.
few seconds at the shortest. invoice to buyer.

Seller Buyer

5. Payment to seller 4. Collecting receivable

MF KESSAI guarantees the payment MF KESSAI collects receivable from

to seller on the due date. buyer.
API Connection 6
Open banking is proceeding, most of banks to open APIs by mid 2020.
Allows third parties to analyze credit with multi-bank data.

Financial Institution Start of API Connection

1 SBI Sumishin Net Bank Mar. 2016 (Ref/Individual &Corporate) Mar. 2017 (Transfer/Individual &Corporate)
2 Shizuoka Bank Apr. 2016 (Ref/Individual)
3 Gunma Bank June 2016 (Ref/Individual) Mar. 2018 (Ref/Corporate)
4 Mizuho Bank Oct. 2016 (Ref/Corporate) Mar. 2017 (Transfer/Corporate)
5 Seven Bank Jan. 2017 (Ref/Corporate) Nov. 2017 (Transfer/Corporate)
6 Aichi Bank Feb. 2017 (Ref/Individual &Corporate)
7 Sumitomo Mitsui Banking Corporation Mar. 2017 (Ref & Transfer/Corporate) July 2017 (Ref/Individual)
8 Minato Bank Apr. 2017 (Ref/Corporate)
9 Japan Net Bank Aug. 2017 (Ref/Individual &Corporate)
10 Michinoku Bank Dec. 2017 (Ref/Individual)
11 MUFG Bank Feb. 2018 (Ref/Individual &Corporate) Apr. 2018 (Transfer/Corporate)
12 Tochigi Bank Mar. 2018 (Ref/Individual)
13 Chiba Bank Apr. 2018 (Ref/Individual)
14 Hokuyo Bank Apr. 2018 (Ref/Individual)
15 Taiko Bank May. 2018 (Ref/Individual)
16 Keiyo Bank Jun. 2018 (Ref/Individual)

*Ref: Referential API

*Transfer: Money transfer API
Absence of Post Crisis Credit Crunch 7
• Unlike other developed economies, 2008 crisis did not impact SME lending
in Japan, hence did not create room for digital alternative lending.
• Public credit guarantee channels, government lending entities and low
loan/deposit ratio reinforces the situation.

(JPY Tr.) SME Loan Outstanding

400

350

300

250

200

150

100

50

0
1999 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
(FY End)

(Source) Bank of Japan, Deposits and Loans Market statistics

Challenges for Japanese Online Lenders 8
• After amendment of nonbank related regulation (2006-07) on interest
rate and total volume, decline of non-bank lending has not recovered.
• Restriction to interest rates (20% up to USD1k, 18% up to 10k, 15% for above)
• Retail lending limited to 1/3 of annual income.
• P2P Lending not legally supported, and lenders will be required to
register as Money Lending Businesses. To avoid such restrictions, loans
need to be packaged into funds with 2+ obligations.
(JPY tr.)
45

40

35

30

25

20

15

10

0
1999 2000 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

(FY End)

(Source) JFSA nonbank lending statistics

Online Lenders in Japan 9
Currently, presence of online lenders are limited.

Loan Provider ALTOA CreditEngine J.Score

Founder Group, Draper

Yayoi, ORIX, Mizuho Bank,
Shareholders Nexus, VOYAGE GROUP,
Founder, d.a.t. SoftBank
500 Startups etc.

Service Started Dec 2017 Jan 2017 Sep 2017

Corporation/Sole Corporation/Sole
Loan Target Individuals
proprietorship proprietorship
JPY 0.5-3m JPY 0.1-5m JPY 0.1-10m
Loan Amount
(USD 4-27k) (USD 1-45k) (USD 1-100k)

APR 3.8～14.8% 8.0%～18.0% 0.9～12.0%

Business/
Loan Usage Business Business
excl. Speculation
Launch of MF Fine 10
• On 11 Jul, we announced launch of MF Fine, an entity dedicated to
developing AI based loan screening model.

• Through our experience with MF Cloud Finance and MF KESSAI, we

have reached a level of confidence where there is
A. room for alternative credit,
B. market that embrace time sensitivity (not interest sensitivity).

• Within our service ecosystem, MF owns accounting/invoicing data,

along with real time cash flow data from multiple banks. Together, we
aim to create a rapid processing lending model towards wider capacity
of SME credit.

• Many SME in Japan access their own accounting data with 1-2mths lag,
and most of lending practices asks for such resources as core
information for credit data. We believe there are multiple resources that
can create better value in credit generation.
So what is alternative credit? 11
T-2days T-30mins T+0 T+1-2days T+1-2mths

Quality Demand POS Bank Accounting

Costly Specialists
Traditional Information N.A. Cash Closed Data
Required
Generation

Que/
Wisdom of Digital Cloud based
Alternative Reservation Multi-bank/
crowds/ payment instancy
data Open Banking
ZMOT
Lending: What could be changed with tech? 12
Generation of Credit
• POS data more valuable than accounting data, enhanced by digital payment
• AI’s ability to estimate demand far before POS
• IoT devices help monitor real time sales
• Ability to screen better borrowers from alternative data (ex. social media)

Online Processing
• eKYC procedures, standardized processing of documents, cloud based
documentation, RPA
• Release of domestic/regional bias of lenders

After Lending
• Ability to pre-screen/monitor borrower behavior
• Alternative collateral

Loan Servicing
• Manual servicing still with large room for digitalization
• Alternative foreclosure
Disclaimer

The forward-looking statements and other contents included in this material are determined based on information
currently available, and may be subject to change due to macro economic trends, changes in the market
environment or industry in which the Group operates, or for other internal/external factors. Money Forward, Inc.
shall not represent or warrant the accuracy or completeness of the information contained in this material.

This material is an excerpt translation of the original Japanese material and is only for reference purposes. In the
event of any discrepancy between this translated material and the original Japanese material, the latter shall
prevail.