The two methods of Crowd Funding and Social Impact Bond (SIB) will be introduced here as examples of recent movements.

Crowd Funding is a term coined from combining “Crowd” and “Funding” and is an investment method of individuals and companies wanting to start a business gathering funds from many unspecified individual investors by posting their business plan on the website (platform) created on the Internet for Crowd Funding. Crowd Funding can be divided into the following types by the manner of compensation/return promised to investors: donation type, purchase of products/

Figure 2-1-104 Types of Crowd Funding

Types	Relationship to the Financial Instruments and Exchange Act	Compensation for Investment	Amount of Investment per Person	Fund Raising Scale
Donation Type	No compensation/returns	None/Letter of Appreciation	From JPY1 per lot	Several tens of thousand yen to Several million yen
Purchase of Products/Services Type	No compensation/returns	Products/Services	From about JPY1,000 per lot	Several tens of thousand yen to Several million yen
Loan Type Has compensation/returns	Has compensation/returns	Profit Equivalent to Interest	From about JPY10,000 per lot	Several hundreds of thousand yen to Several tens of million yen
Business Investment Type	Has compensation/returns	Business Profit	From about JPY10,000 per lot	Several million yen to Several tens of million yen

Source) Developed by Small and Medium Enterprise Agency from information posted on fund development websites

services type, loan type, and business investment type (Figure 2-1-104).

The general process flow for Crown Funding is as follows: posting a proposal on the website (platform), evaluation by the website management, creating an appeal for funds page, start of appeal for funds, project execution, compensation to investors (except for the donation type). Furthermore, in some cases there is a mechanism so that a target amount set for the appeal for funds, and if the target amount is not reached, the proposal is considered a failure and funds cannot be procured.

The compensation to the investors is not necessarily money, so that even for regional contribution activities which had a difficult time procuring funds from conventional financial services, it becomes possible to procure funds and gain support of investors if the business plan matches the needs of the district. As a result, new flows of reinvestment into the district are created and community contribution is facilitated. In addition, there are other resulting effects from announcing a the fund appeal, such as increasing the residents' interest in the district and getting a grasp on the needs and issues of the district through seeing the number of investors, the amount of funds being collected, and the length of time it takes to collect the necessary funds.

Social Impact Bond (SIB) is an investment method whereby entities such as NPOs conduct business to solve social

problems by receiving funding from private investors. If a business achieves a successful social performance (such as reducing government administration costs), a portion of the costs saved by the government will be paid as compensation to the investors. For businesses that were not able to achieve results, the government does not have an obligation to pay returns, which means invested funds will not be returned to the investors, making the invested amount a donation by default. SIB was implemented for the first time in the world in the U.K. in 2010, and since then this method has been used in places such as the United States and Australia to fund preventative programs such as repeat offense prevention for prisoners and child abuse prevention.

There has been no actual implementation

* As the Japan Foundation is funding this pilot business, there will be no payment (reimbursement) from Yokosuka City regardless of the project results.

Source) Developed by MLIT from materials of Yokosuka City