Microfinance for the Tohoku

Small businesses are often the backbones of the community, but they are also often the hardest hit in times of disaster. Microfinance is becoming an important tool in the Tohoku to revitalize the community by helping these ailing businesses.

___________________________

In boom times, small businesses usually account for a large portion of job creation, are hotbeds for innovation and are often the backbone of a community. Sadly, however, small businesses were some of the hardest hit victims of the Tohoku earthquake and tsunami last spring.

Revitalizing them is one of the keys to rebuilding the region but with many of the devastated businesses in the Tohoku only employing a handful of employees, unable to get new financing because of outstanding loans, too small to make economies of scale and, for now at least, not focusing on innovating new products, they don’t have the means to attract the interest of big banks of venture capitals.

Luckily for them, however, they are attracting the notice of microfinance institutions, often from the most unlikely backgrounds. One of these, for example, is Music Securities which started up as micro-credit services for fledgling musicians.

Microfinance has been a buzzword in financial and development circles for a while now, but many people in developed countries are unaware of the ways it can affect their lives. Microfinance associations offer financial services, credits and investments to a wide variety small businesses or individuals which are normally overlooked by traditional financial institutions. Because of this, in developed countries as well as developing countries, microcredit is a way of empowering local and small scale actors who are often undervalued like artisans or food producers.

Many of the most devastated small businesses in the Tohoku are indeed food producers. It helps to have financial services adapted to the specific challenges they face and their slower, more unsteady, pace of business. Music Securities does this by offering half of its’ investments as donations and making provisions for returns on the remaining half to be leveraged over a long period.

Music Securities also points out how micro-finance can be mutually beneficial to both investor and business. They use the same model they developed in the music industry where artists repaid in kind (with thinks like CDs or concert tickets) as well as cash, making investors their “fans”, onto the Tohoku food industry. In Japan, where personal and involved “wet” relation still play an important role in business, being directly involved in grassroots activities fosters investor trust.

The small scale investment benefits the investor, the investor benefits the business and the business in turn benefits the community. Because unemployment benefits for devastated regions will soon run out, it is now especially important to stimulate job creation in order to not take a step backwards.

Though avoiding taking a step backwards, taking a step forward remains a challenge tough. The returns for such labor intensive work are often small. Each company is different and each needs special attention, but even if all of the hundreds of ailing small businesses in the Tohoku could be helped, they might each only create a few jobs.

Despite the momentous challenges before them, however, micro-financers remain positive and continue to see the opportunities rather than the obstacles. Personally, I think that it is this overwhelming positivity which is ultimately the rehabilitate-Tohoku campaign’s strongest resource.

Visit Music Securities’ website, or for more information in English, read an article on Tohoku microfinance in the Japan Times