How Do financial Institutions and Other Management Supporters Contribute to the Improvement of Business Conditions of Small and Medium Enterprises? Based on the Survey on the Aftermath of the SME financing Facilitation Act (Japanese)

The important role of private financial institutions in supporting poor performing small and medium enterprises (SMEs) to undergo drastic reform is widely recognized, and since the enforcement of the SME financing Facilitation Act in 2009, changes in loan conditions have been used frequently as a method of financial support. However, some critically argue that since financial institutions are responding frankly to requests for changes in the repayment conditions but not seriously working on supporting SMEs in their business revitalization, the changes in the loan conditions have not become a trigger for fundamental reform of the companies' business, and are used only to postpone the problem. Also, others argue that there is a moral hazard on the SME side because SMEs can avoid short-term financing difficulties and are not serious about working on reform. However, external observers have had limited access to information on the support posture of financial institutions and the reform efforts of SMEs after changes in the loan terms. Therefore, in this paper, using the Survey on the Aftermath of the SME financing Facilitation Act (conducted by RIETI in October 2014), we analyze how the formulation of management improvement plans and the management support attitudes of financial institutions and other management supporters affect the recovery of SMEs' business conditions and examine what forms of management support will lead to the improvement of these conditions.