eGuarantee’s goal for society
We want to extend credit to more companies in reflection of their fundamental nature
The main way that SMEs and the many other companies in Japan obtain funding is through indirect financing in the form of loans from banks and other such institutions. In indirect financing, the main method of evaluation is a quantitative and static assessment of companies based on the principle of collateral, where funding can only be received if collateral (especially real estate) or a guarantor is provided. As such, this makes it difficult for companies to obtain funding if they do not possess much land or cash, even if they possess excellent technology or services. And this means there are cases where they are unable to undertake their desired transactions.
Instead of the kind of quantitative and static company assessments conventionally carried out by financial institutions, eGuarantee performs qualitative and dynamic company assessments using big data that includes the status of business-to-business payments, and by doing so, aims to expand the base of companies for which credit guarantees can be provided in order to support as many companies as possible in their endeavors.
Separating risk underwriting and funding provision is a step towards a new kind of finance
eGuarantee believes in a new kind of finance.
The majority of financing at present combines the act of underwriting risk with the act of providing funds. For example, a bank may put together funds, lend them to a borrower, and bear the risk of the borrower going bankrupt. But if it were possible to separate risk underwriting and fund provision, it may be possible for an individual to lend funds to a company on the internet, and to hedge the risk with eGuarantee by pressing a “guarantee” button on the website to get the risk underwritten.
There are many providers of funding, but the number of those able to perform risk analysis is limited. If there were an entity with the singular role of analyzing and underwriting risk, the speed and potential of funding would increase and enable many companies to obtain a diverse range of funding while also opening the door to increased revenue for many funding providers. We believe that the separation of risk underwriting and funding provision is the first step towards a new kind of finance.
Our goal is to provide solutions for issues faced by society, and to create a society where new business is constantly created
The original work of finance is said to be to facilitate the appropriate distribution of finite resources (such as wood and iron) in line with the needs of society. Potential uses for a piece of wood might include using it in the building of a house, using it as fuel, and a range of other purposes, so finance should ideally allocate it to the use that best suits society.
In a liberal economy, the situation that society wants is one where the same amount of wood can be sold at a higher price, thereby allowing for the purchase of wood at a higher price, which in turn attracts wood to the sector.
If a new company that uses wood for its business comes up with an idea for a project and wants to obtain the wood to implement it, it must first raise funds to purchase the wood. However, companies that do not have a long history often also do not have many assets, and this means that in most cases they cannot obtain much funding. If companies have to save up the funding to do business because they are unable to obtain funds from elsewhere, then the world would start to move very slowly. We provide guarantees so that such companies can obtain raw materials on a deferred settlement basis or can obtain funding. Through our guarantees, we aim to drive forward the growth of new business in order to provide solutions to the issues faced by society and to help achieve a society where new initiatives are constantly created.
The field of finance will become important for Japan
In its process of economic growth based on a flourishing manufacturing sector, Japan acquired a lot of financial assets. However, labor costs have risen through economic growth and have become significant, meaning that the country is no longer profitable in manufacturing sectors that involve low levels of processing.
We believe that for Japan, which has few of its own resources and relies on imports, an important economic area to earn the capital to import resources going forward will be the field of finance. The capacity for risk tolerance that Japan has is nothing short of a financial asset that the country obtained during its economic growth. In order to make the most of this risk tolerance capacity and convert it into income, risk analysis capabilities and entities to play the role of diversifying risk and turning into an investment opportunity are needed. We want to give as much as we can to help fill this role.
First from Japan to the rest of Asia
Although free trade between countries sometimes suffers a temporary slowdown or setback, we believe that it will always grow going forward. And if each country makes the things that they are good at and exchanges them, the world will become a richer, more abundant place.
Transactions between countries comprise many elements of uncertainty, including difficulties in obtaining information on transaction partners. If the number of companies providing guarantees increases in each country as in Japan, these companies can shoulder the burden of risk in the relevant country, and this can result in freer trade when put together to form a whole. We will steadily and surely expand our method for controlling risk in transactions from Japan to the rest of Asia, and hope to play a core role in this system.