Research Project forJapanese Dormant Account Fund 2011 NPO ETIC. SAL All Rights Reserved. 1
Table of Contents:
Executive Summery Brief Overview on Dormant Account Case Studies from the UK, Korea and Ireland Japanese Dormant Account Fund Scheme Dormant Account Fund: Possible Uses Using Dormant Deposits for Tohoku Relief About Florence and Social Agenda Lab
1. Executive Summery NPO ETIC. SAL All Rights Reserved. 2 Summery
This project was officially launched on January 7th, and Mr.Komazaki and four skilled pro-bono workers have conducted a research on dormant account in general, as well as on the precedent cases in the world and on its surrounding environment in Japan.
The output of this research was presented in documents by Mr. Komazaki at New Public Commons Roundtable.
Furthermore, after the earthquake, this project has led to suggesting the use of dormant account fund for the earthquake relief efforts as well.
Duration: 4 months from January 7th, 2011
The definition of dormant account and its volume Possible scheme and opinions of stakeholders Research Questions Research on case studies abroad (Especially the scheme in Korea) Based on the scheme, put together a draft of a feasible scheme Share the draft with stakeholders and receive feedbacks Process
2. Brief Overview on Dormant Account NPO ETIC. SAL All Rights Reserved. 3
A dormant account is a low-balance savings account which has shown no activity (deposits and/or withdrawals) over a long period, other than posting of the interests and/or service charges.
The definition of a dormant account (the length of time during which the account showed no activity, etc.) depends on each country and its law. There are many cases in which the definition is different amongst the banks as well.
Statute of limitations usually does not apply to dormant accounts, and the deposits can be claimed by their owners or beneficiaries at any time.
In Japan, after ten years of showing no activity, the dormant deposits are counted as the banks’ profit.
There are movements mainly in the developed countries to use the deposits as a fund for providing social and public services, and the establishment of a scheme of dormant account fund and the protection of the depositors’ rights by law is in progress.
The key findings after researching on the precedent cases in the UK, Korea and Ireland
NPO ETIC. SAL All Rights Reserved. 4 3. Case Studies from the UK, Korea and Ireland The background: there were protests against the banks that were counting the savings in dormant accounts as their profits, which led to movements for using it to provide social services. Due to the public opinion, England and Korea developed an IT system that enabled the individuals to search for the dormant accounts online, making it easier to manage them. This system hasn’t been developed in Japan yet. There was a case in the UK that has established a dormant account fund even though such IT system did not exist in the first place Therefore, it became clear that establishing a dormant account fund in Japan is possible, as the condition in Japan is rather similar to the cases in the world before the creation of such funds
Build a reference system that works across financial institutions so that the rights of credit holders are protected and it becomes easier to search for dormant accounts
Build a management foundation regulated/supervised by Financial Services Agency with the citizens as the main actor
Provide special tax benefits to the financial institutions, and raise funds in donation for the managing foundation
Financial Services Agency Alliance 【 Merits for the Financial Institutions】 Tax Benefits, Lower management fees for dormant deposits Regulate/Supervise Regulate/ Supervise NPO Bank Citizens Dormant Deposits Management Foundation Opening an account Child Consultation Center Financial Institutions Donation from Formant Account Fund DV Prevention Center Return of Dormant Account Intermediate SupportCenter Data Synchronization of Dormant Accounts Dormant Deposits Index Reference System University Reference to Dormant Accounts Management of Dormant Accounts Legend Financial Institution Money Flow Governmental Institution Regulation Supervision Related to Dormant Account 5 NPO ETIC. SAL All Rights Reserved.
Japanese version of dormant account fund will be implemented on a basis of making financial loans
In order to provide the funds effectively for social sector, it would be productive to make alliances with NPO banks, institutions that provide intermediary supports, Universities, child consultation centers, etc.
It would be optimum to implement the fund for both services that require immediate action as well as for services that require careful and nurturing care
Alliance partners Uses Dormant Account Fund Final beneficiaries Purposes Single-parent Entrance fee for children NPO Bank Medical services for people without insurance Foreigner Interest-free Loans Services that require immediacy Consolidating debts Heavy debtor Moving cost（e.g. protection from domestic violence) DV Prevention Center Interest-free Loans Single-parent Japanese Dormant Account Fund Intermediate Support Center Interest-free Loans Social entrepreneur Supporting social entrepreneurship University student Services that require nurturing care Expenses for studying abroad University Interest-free Loans Grad student Designing and operating a research program NPO ETIC. SAL All Rights Reserved.
5. Dormant Account Fund: Possible Uses Example: Using the fund for children from care homes to receive University education
The total number of children in care homes is about 30,000 and their university entrance rate is only 10.8%, which is very low compared to the national average of 53.9%
The living expenses of an average University student excluding tuitions in 4 years is about 6 to 7 million yen
By lending 30 billion yen from dormant account fund, all the children could receive University education if they wish
Current state of children’s care home Expenses required for entering an University Expenses required ・Tuition： At least 2.5 million yen（public University） ・Living expenses： 6-7 million yen/4 years ・Other expenses：fees to take entrance exams, etc. ・Assumption: the tuition is supplemented by receiving scholarships Data ・Number of Children: 29,753 （2009） ・Average years living in a care home: 4.6 years ・Percentage of children entering Universities: 10.8% （National Average:53.9％） ・Main reason of the low entrance rate: financial ・Every year, about 6,500 children leave care homes upon graduation from high schools Loans of 6 million yen/ person are needed Assumption: 3500 children from care homes wish to enter Universities at national average rate of 53.9％ Assumption: the tuition is supplemented by receiving scholarships 30 Billion Yen ０ ０ ３ ５ people is enough to fund all the children from care homes who wish to study at Universities Required funding is About 21 billion yen ＊If living expenses of 6 million yen/4 years has to be earned by doing part-time jobs, the children will have to work for more than 150 hours per month at 800 yen per hour References: http://www.e-stat.go.jp/SG1/estat/List.do?lid=000001068770 http://www.mhlw.go.jp/stf/shingi/2r98520000011cpd-att/2r98520000011dad.pdf http://www.crc-japan.net/contents/notice/pdf/h20_0722.pdf NPO ETIC. SAL All Rights Reserved.
Dormant Account Fund can be established in Japan under three conditions:
①the depositors can easily find their dormant accounts through a online reference system ②the banks receive tax benefits ③transparent external foundation manages the fund
The operation risk can be held down by mainly investing the fund to institutions such as NPO, banks and Universities, and using it only for relatively small loans.
The total amount of dormant deposits that are counted as profits by all the financial institutions is estimated to be about 100 billion/year. If 40% of it is set aside for reclaims by the depositors, 60% of it is surplus. The fund can create a large social impact even if we could only make a use of half of that 60%, which is 30 billion.
Services that require immediate action or nurturing care can only be provided and should be provided on a private foundation scheme.
The operation of the foundation has to be kept transparent under the supervision of Financial Services Agency.
After the Great Hanshin Earthquake, the recovery cost was 30 billion yen, the directly incurred cost was 10 trillion yen and the reconstruction projects’ cost was over 16 trillion yen.
In case of the Tohoku Earthquake, the recovery cost is assumed to be about 100 billion yen and directly incurred cost to be about 25 trillion yen. However, directly incurred cost does not include the effects from planned power outage and individual compensations. Given this fact, the reconstruction cost is estimated to be much greater than it was in the case of the Great Hanshin Earthquake.
Recovery Cost: 30 Billion Yen Directly Incurred Cost: 10 Trillion Yen Reconstruction Projects’ Cost: About 16 Trillion Yen The Great Hanshin Earthquake（1995） Tripled Doubled Directly Incurred Cost Max. 25 Trillion Yen Reconstruction Cost Assumed to be Enormous Recovery Cost About 100 Billion Yen The Tohoku Earthquake（2011） NPO ETIC. SAL All Rights Reserved.
When the government or municipal bodies provide the fund for reconstruction, there are three main challenges
It places an enormous financial burden on local governments
The use of the fund is often constrained during the reconstruction period
It takes time to reach a decision on the spending method
The fund lacks the speed in terms of utilizing it according to the needs from the affected area that are constantly and rapidly changing
It is difficult to respond to the needs of individual compensations
There are groups of people who cannot receive the support within the framework of the existing system, including those who have lost the loved ones, those with disabilities and those who have evacuated to other prefectures
For the recovery and reconstruction efforts, we need a fund that does not specify its use and could be used for providing varied and fine supports in a timely manner. NPO ETIC. SAL All Rights Reserved.
6. Using Dormant Deposits for Tohoku Relief Using the fund for providing loans for life and wellness of the Tohoku earthquake victims
The average amount of special loans provided by the government is 150,000 yen
There were about 200,000 houses that were fully-destroyed after the Great Hanshin Earthquake
If 30 billion yen from dormant account fund is to be used to provide loans, it will be possible to support all the families whose houses were fully-destroyed
Average amount of loans The scale of damages after the Great Hanshin Earthquake Data ・The scale of the damages from the Great Hanshin Earthquake Fully-destroyed houses：200,000 houses Half-destroyed houses：260,000 houses Expenses required ・The average amount of special loans given to the disaster victims： 100,000 to 200,000 yen ・The amount of financial compensations after the Great Hanshin Earthquake The average: 150,000 yen In total: 55,000 cases, 80 billion yen ＊People could apply for the compensations 10 days after the disaster for 2 weeks Assumption: all 200,000 families whose houses were fully destroyed and require immediate loans Loans of 150,000 yen/ family are required 30 Billion Yen families ０ ０ ０ ０ ２ ０ Required amount of loans About 30 billion yen is enough to make immediate loans to all the families in needs Reference: http://www.bousai.go.jp/1info/kyoukun/hanshin_awaji/download/index.html NPO ETIC. SAL All Rights Reserved.
Mr. Komazaki was born in 1979 and entered Keio University in 1999. While he was enrolled in the University, he managed various technologies as business.
Yoshiaki Ishikawa / NPO ETIC. SAL Hiroki Komazaki / NPO Florence, CEO
In SAL (Social Agenda Lab), teams that consist of skilled pro-bono workers provide research services to social entrepreneurs, in order for them to effectively and fundamentally solve problems in the society. SAL focuses on research because when tackling social problems, it is crucial to identify their structures, to draw possible solutions and to secure resources by assessing and reporting the value of the social services accurately.
After graduation, he encountered a problem in Japanese society in which it was still very difficult to have a job while raising children. He then decided to establish an NPO called Florence which provides community-based care services for children.
As a social entrepreneur himself, he felt the need of a system that can bring money to private organizations providing social services. Thus, when he learned that there was a movement in Korea which aimed at mobilizing the money from dormant accounts, he started looking for a possibility of doing the same in Japan.