Personal loan Personal may refer to: Aspects of persons' respective individualities * Privacy * Personality * Personal, personal advertisement, variety of classified advertisement used to find romance or friendship Companies * Personal, Inc., a Washington, ...

s in Japan are provided by three types of providers. First, there are large, traditional banks, with a long history. Their big advantage is the availability of loans and branches of these

bank A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets. Because ...

s. Loans are also provided by specialized consumer credit companies. These are often owned by large,

multi-national corporation A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...

. For example, Acom, one of leading consumer credit companies in Japan, is owned by

Mitsubishi UFJ Financial Group is a Japanese bank holding and financial services company headquartered in Chiyoda, Tokyo, Japan. MUFG holds assets of around US$3.1 trillion as of 2016 and is one of the "Three Great Houses" of the Mitsubishi Group alongside Mitsubishi Corp ...

. The advantage of these loans is their availability when these companies are willing to serve customers who do not have a bank loan. A big role is played by

psychology Psychology is the scientific study of mind and behavior. Psychology includes the study of conscious and unconscious phenomena, including feelings and thoughts. It is an academic discipline of immense scope, crossing the boundaries between ...

, when many people feel shame when they go to apply for a loan to the bank and often needs a

guarantor In finance, a surety , surety bond or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. Usually, a surety bond or surety is a promise by a surety or guarantor to pa ...

. On the

Japanese Japanese may refer to: * Something from or related to Japan, an island country in East Asia * Japanese language, spoken mainly in Japan * Japanese people, the ethnic group that identifies with Japan through ancestry or culture ** Japanese diaspor ...

market, there are companies that operate at so-called gray zone, sometimes called

sarakin is a Japanese term for a legal moneylender who makes unsecured loans at high interest. It is a contraction of the Japanese words for and . An illegal loan shark who goes above legally permitted maximum interest rates is called ''yamikin'', short ...

. According to estimations, about 10% of the population borrowed from them and there are about 10,000 companies like that on Japanese market. Interest rates were as high as 29.2%. This rate was capped to 15-20% p.a. On

market, it is not as common to work with credit score as with western markets. Every company and bank uses its own credit rating model without any help of

credit bureau A credit bureau is a data collection agency that gathers account information from various creditors and provides that information to a consumer reporting agency in the United States, a credit reference agency in the United Kingdom, a credit repor ...

. Many regional banks are facing several obstacles – high risk-aversion in Japanese population in general. Secondly, the competition is increasing on the market and legal framework is getting stricter. Finally, many young people are moving to big cities, where they are handled by big banks. This led to the merger of the

Bank of Yokohama is the largest regional bank in Japan, operating mainly in Kanagawa Prefecture and southwestern Tokyo. It currently operates 610 offices in Japan and five offices overseas (Shanghai, Hong Kong, Bangkok, New York and London). History The bank wa ...

and Higashi-Nippon Bank. Last and most recent platform, is

P2P lending Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders with borrowers. Peer-to-peer lending companies often offer their services online, and ...

. There are only few operators in Japan running this platform so this kind of distribution channel is still minor.

List of top 15 biggest retail banks in Japan

List of biggest consumer credit companies

* Acom - currently a market leader with 713 billion yen in outstanding unsecured loans to consumers *

Aiful ({{tyo, 8515) is one of the largest Japanese consumer finance companies. The company is based in Kyoto and has annual profits of close to ¥100 billion on over ¥2 trillion worth of loans (2005). The company had to restructure its debt after fa ...

- with 216 billion yen in outstanding unsecured loans to consumers *

Takefuji is a Japanese consumer finance company, or ''sarakin''. On September 28, 2010 it filed a petition for commencement of a corporate re-organisation under the Japanese Corporate Reorganisation Act. Services The Group's principal activity is the pro ...

* Sumitomo Mitsui Banking Corporation - (formerly Promise Co.) – with market name Mobit - with 181 billion yen in outstanding unsecured loans to consumers

List of biggest P2P platforms

* maneo, Inc. - the first P2P platform in Japan, established in 2007. It started as a consumer loan provider, bud changed its focus on

SME SME may refer to: Economics * Small and medium-sized enterprises * Socialist market economy, an economic system of China Organizations Music * SME Limited, UK audio turntable manufacturer * Sony Music Entertainment, US * Spontaneous Music Ensembl ...

soon. It focused on customer-credit and extended product variety to real-estate collateralized loans. * AQUSH - second P2P platform in Japan, established in 2009 * SBI Social Lending Co – established in 2008, launched in 2011. This platform focused on collateralized loans too. * Crowdfunding, Inc.., announced in 2013

Loan demand

Demand for loans in Japan is rising again. After a drop in 2010 and 2011 slow recovery become visible again. Concerning year 2014, demand grew slightly especially due to auto loan demand, which driven positive performance of entire market. Performance in first four months of 2014 year was driven by

VAT A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...

increase that made a high demand for expensive items in order to save taxes. In June 2015, banking lending grew by 2.6%. Key drivers were regional banks, with growth 3.8% comparing to the same month last year. Major banks grew by 1.2%. Key product on Japanese market are still

credit card A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the o ...

s with current boom of contactless payments that allows faster processing of every payment at POS terminal. This trend moves cash payments to card/contactless payments. Nevertheless, Japanese attitude is stable – risk-averse. Japanese are using their credit cards often as

free riders In the social sciences, the free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods (such as public roads or public library), or services of a communal nature do not pay for them or under-p ...

– repaying their balance at the end of the month.

The 2010 Money Lending Business Act

Due to this act, many small companies on the edge of the market went to bankruptcy. Many other were sold according to decreasing

profitability In economics, profit is the difference between the revenue that an economic entity has received from its outputs and the total cost of its inputs. It is equal to total revenue minus total cost, including both explicit and implicit costs. It i ...

of the business. For example, GE was selling Lake, their consumer-credit division.

References