By EIJI ZAKODA/ Staff Writer
November 8, 2023 at 17:44 JST
A Japan Finance Corp. officials listens to an inquiry from a potential customer. (Asahi Shimbun file photo)
About 1 trillion yen ($6.6 billion) in loans that government-affiliated lenders extended to small businesses during the COVID-19 pandemic will likely never be recovered, according to a Board of Audit study.
The study covered collateral- and interest-free loans extended to small businesses that were reeling from the effects of the novel coronavirus pandemic.
The first study of its kind by the Board of Audit involved loans made by Japan Finance Corp. and Shoko Chukin Bank since March 2020.
Most of the approximately 19 trillion yen in loans were, in principle, made collateral- and interest-free.
As of the end of fiscal 2022, the outstanding balance of loans was 14.308 trillion yen, covering about 980,000 loans to small businesses.
Of that amount, a total of 1.072 trillion yen, or about 6 percent of the total, was defined as either irrecoverable or a bad loan that would be difficult to recover.
Those figures reflect the difficulties faced by small businesses.
According to Tokyo Shoko Research Ltd., there were 2,599 bankruptcies stemming from the COVID-19 health scare in fiscal 2022, a large rise from the 1,155 in fiscal 2020.
While the overall economy has recovered from the worse of the pandemic, bankruptcies are continuing among restaurants and construction industries faced with higher materials costs and worker shortages.
The government has extended a total of about 31 trillion yen in fiscal support to Japan Finance and Shoko Chukin Bank as well as using taxpayer money to shoulder the interest burden of the loans.
The Board of Audit also studied a sample of loans made by the two institutions and found inadequate checks of the financial backgrounds of prospective borrowers.
In particular, the board examined 353 loans totaling about 3.6 billion yen made by Japan Finance that will have to be written off. In 59 of those cases, Japan Finance did not obtain the most current financial statements of the borrowing company.
A Japan Finance official said efforts would be made in the future to accurately gauge the cash flow of potential borrowers in response to the points made in the Board of Audit study.
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