Dialogue 02

Dialogue 02
Financial Inclusion as Viewed from the Perspective of Microfinance

Financial Inclusion as Viewed from the Perspectiveof Microfinance    The idea of microfinance advocated by Grameen Nippon and the concept of financial inclusion promoted by
MARUI GROUP are connected on a level that exceeds the boundaries of each organization. The following is a conversation between two individuals that met Grameen Bank founder Professor Muhammad Yunus around the sametime and that both have visions for finance that opens itself toward the future. Sharing the same ideals, these two
individuals will discuss the potential of financial inclusion.

Masahiro Kan

Hiroshi Aoi

President
Grameen Nippon

President and Representative Director
Representative Executive Officer
MARUI GROUP CO., LTD.

Meeting with Grameen Bank Founder
Professor Muhammad Yunus    Aoi: My first encounter with Grameen Bank founderMuhammad Yunus came at a lecture he delivered inJapan in 2007. This experience prompted me to establish Social Business Platform, a general incorporated
foundation, with my friends. We invited Professor Yunus
to serve as a special advisor to this foundation. Mr. Kan,I would like to ask how you met Professor Yunus andwhat inspired you to create Grameen Nippon.
Kan: I first met Professor Yunus in 2008 on a visit toGrameen Bank in Bangladesh. Even today, I still vividly
remember the professor’s explanation of how micro­
finance was without a doubt applicable to Japan. It tooka decade, but I was finally able to establish Grameen
Nippon in 2018. I had previously been involved in government finance and financial policy at the Ministry ofFinance. A major turning point came when my family’sliquor store, which my uncle had taken over, was forced

to close around 2004. Seeing how those around him
reacted to the closure, I was shocked at how cold others
were to him. I did not want to live in a cold society when I
grew older. My first encounter with microfinance andProfessor Yunus came when I was mulling over thesefeelings. After this encounter, I came to view my priorgovernment experience as having been the preparation
for microfinance. Each subsequent time I met Professor
Yunus, I left feeling even more empowered. The professor is truly the person I respect the most in this world.
Aoi: It was around the time of my first encounter withProfessor Yunus that I was searching for ways to contribute to society through our main business. Not finding ananswer, I remember being moved by the creative idea ofProfessor Yunus to “put poverty in the museum.” Up untilthat point, the common approach was to use the earnings of one’s business to fund charities or CSR activities.
However, the professor advocated an idea for social
businesses in which dividends are not paid because
investments are used to fund the actual business.
Kan: One of Professor Yunus’ Seven Principles of Social
Business is “Investors get back their investment amountonly. No dividend is given beyond investment money.”
Under this principle, if an investor puts ¥10,000 into asocial business, they will only get that ¥10,000 back,even if the business grows this ¥10,000 to ¥12,000 or¥13,000. A normal public company would return theadditional ¥2,000 or ¥3,000 to investors in the form ofdividends, but the dividends issued by a social businessare zero. Any returns that exceed investments are used toimprove and expand the social business.
Aoi: Listed companies like MARUI GROUP seek to realizesocial contribution through their business by paying dividends. Accordingly, Professor Yunus’ ideas were moststimulating. We define corporate value as being represented by the intersection between the happiness of all
stakeholders. I arrived at this idea when my way of viewing the world was transformed by Professor Yunus, leading me to see intersections between concepts I previously
thought to be completely separate.

Mutual Trust Bridging Gap Created byInformation Asymmetry    Aoi: Grameen Bank has arms in both developing countries and developed countries like the United States.
What type of customers do you serve in Japan?
Kan: The individuals that come to borrow money from
Grameen Nippon are people with a desire to work but
who are unable to do so because of their own poverty.
For example, we cater to single mothers looking toMasahiro Kan
President, Grameen Nippon

Born in Fukushima Prefecture, Mr. Masahiro Kan was involved in financial policy
at the Ministry of Finance and served as an executive director for Japan at theWorld Bank Group before he became a professor at Meiji Gakuin University in2017. A meeting with Professor Yunus in 2008 proved to be a turning point in
his life. Committed to promoting microfinance in Japan, Mr. Kan created the preparatory institution that would become Grameen Nippon with his colleagues inAugust 2017. Grameen Nippon was formally established and commenced operations on September 13, 2018.

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Dialogue 02

Dialogue 02

Financial Inclusion as Viewed from the Perspective of Microfinanceimprove their lives through work, members of the working poor who are proactive toward work, and other individuals that have previously been excluded from financial
services. The only condition for receiving financing is forborrowers to form mutual aid groups of five people.
Loans are then provided with no need for collateral or
guarantors. In this manner, we simultaneously supply theseed money for funding their aspirations and provide an
opportunity to work or give support to their job search.
Borrowers can start their own business or look for
employment. Those that want to become a care worker,
financial planner, or some other specialist can receive
funds to cover the tuition payments for obtaining thenecessary qualifications or education.
Aoi: Is the need to form groups of five a standard worldwide rule for Grameen branches?
Kan: Yes, the group of five rule is a core aspect ofGrameen Bank’s approach, and Grameen Nippon also
requires prospective borrowers to form mutual aid
groups of five people. We provide funds to people thatwant to work but lack the money without asking for collateral or guarantors. A normal bank would not loan
money under such conditions. The true goal of financing
should be to supply money to the people who really needit, but the reality of finance is much different. This isbecause we are unable to resolve information asymmetryissues. The Grameen model aims to address this issue by
having borrowers form groups of five and holding weekly

Financial Inclusion as Viewed from the Perspective of Microfinancemeetings among these groups. In other words, you could
say that we will not provide financing if borrowers cannot
build trust among themselves. Mutual trust is therefore
crucial to our approach to financing.

Overlapping Ideas from Different Backgrounds    Aoi: MARUI GROUP’s credit card services business is not
only unique in that it arose from a retailing business but
also in the credit philosophy that has guided it since its
inception. We do not assign customers credit limits
based on their income, assets, age, or job. Rather, allcustomers start off with low credit limits that are gradually increased in conjunction with their usage amounts
and payment histories. Although most credit card businesses only achieve return on invested capital of
between 1% and 2%, we boast a return of 3.8%. One
reason for this difference is that around half of our cardholders are in their thirties or younger. While they may
not have a lot of income or assets, they spend a lot due
to life events, such as renting housing, getting married, orhaving children. As a result, their card usage rates arehigh. Regardless of this younger cardholder base, ourratio of delinquent debt is the lowest in the industry, afact that is hard to comprehend for European and U.S.
investors. Our founder believed that creditability should
be built together with customers. This belief gave rise toGrameen Bank loans money to people
with no money without asking for collateral.
Mutual trust is therefore crucial.

our concept of the co-creation of creditability, which is
the wellspring of value, the core value that has supported
us throughout our 87-year history.
Kan: That concept is the same as the business model ofGrameen Bank. At Grameen Nippon, we refer to borrowers as “members.” This is because, rather than the onesided provision of credit, we seek to foster mutual trustwith borrowers, a desire that overlaps with MARUIGROUP’s concept of co-creation.
Aoi: When I first heard of Grameen Bank, its philosophy
resonated with me. I was struck to know that we were notalone in our thinking. Up until then, I had thought that
our approach toward finance was unique, an approachthat no one else could understand. What Grameen Bank
preached was the same as the financial inclusion we pursued. Our backgrounds may be completely different, but
our ideas overlapped. It was fate. Professor Yunus mademe realize that, while financial inclusion was an approach
to finance that differs from the traditional approach seenaround the world, it could be seen as an approach oriented toward the future. If we view the entirety of financial services, not just credit cards, from the perspectiveof financial inclusion, we will see that the vast majority offinancial services are primarily offered only to the wealthy.
As such, younger generations and other individuals havebeen excluded from these services. Recognizing theproblems with this situation, we chose to establish asecurities company specializing in cumulativeinvestments. It is clear that the model of Grameen Bankand our business are connected on some deeper levelthat transcends their form and origin. This connection isvisible in our approaches toward co-creating creditability
and in our stances toward including everyone.
Kan: There are many aspects to the society that Grameen
Nippon aims to create, but first and foremost is our vision
for a society free from poverty in which everyone isempowered. This goal entails including the socially disadvantaged. Microfinance is truly an endeavor in financial
inclusion. I am confident that financial inclusion will prove
to be a pioneering initiative representative of future socialand global trends. One such trend is the United Nations
Sustainable Development Goals, the first of which is to“end poverty in all its forms everywhere.” This goal means
to eradicate poverty, not just in developing countries, butalso in developed countries like Japan. One defined target
for this goal is to “by 2030, reduce at least by half theproportion of men, women and children of all ages living
in poverty in all its dimensions according to national definitions.” The quest of Grameen Nippon coincides completely with this goal. There is an African saying that goes
“fast alone, far together.” Grameen Nippon adopted thissaying as its motto. If we are united together, even if oneof us may falter, our aspirations will travel far. We arecommitted to moving forward with our comrades.

Our backgrounds may be completely different,but our ideas overlapped. It was fate.
Hiroshi Aoi

Masahiro Kan3637