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J Trust finds a banking market niche in ASEAN

Interview - November 10, 2017

Nobuyoshi Fujisawa, President & CEO of J Trust, says that while other big banks focus on mega projects, J Trust has focused on a business approach that not only generates profits, but is improving lives and ‘making people happy’ through microfinancing and small business loans for farmers and local communities


Asia represents a consumer market with more than 3.3 billion people. What potential do you personally see in the region?

From my perspective, there are plenty of opportunities for Japan, South Korea or Singapore in the ASEAN market. Although Japan suffers from a shrinking population, the remaining regional markets are experiencing a demographic and economic boom. In order to support such a huge economic expansion, more infrastructure – both soft and hard – will be needed, which will further contribute towards a GDP increase. As a result, investing countries such as ours can benefit hugely from such (economic and demographic) bonuses.


The Abe administration was hoping to see a further boost for FDI into Southeast Asia through the Trans-Pacific Partnership (TPP), but US President Donald Trump dashed those hopes when he pulled his country out of the pact in January. In a previous interview you said that, “I believe that the TPP will have a positive effect for us”. Now the circumstances have completely changed. How would you reassess the whole situation and in which direction do you believe Japan will move? How could this affect J Trust?

The last time we spoke about such topics was for the establishment of the TPP, yet it did not happen. As a business model, we are still planning for the TPP. Nevertheless, we must think at a micro-economic level, and not to be heavily affected by such unforeseeable political decisions.

You have mentioned the foreign investment incentives of Prime Minister Abe towards these areas. In the case that words become a fact, the only companies in Japan that will leverage on its business potential will be the ones with a long-term business track record (like the case of Toshiba).

A “new-generation” company like ours does not feel any tangible benefits out of this initiative. By strategizing at a micro-economical level, we have put in place a business model that enables us to address both positive business momentum and less positive ones by being flexible towards addressing the needs and demands of dynamic markets. Going overseas within the ASEAN market implies creating companies that can restructure their business model, ensure good penetration and presence, while not losing money.


Why should the ASEAN community and its people for instance from Indonesia, choose your products over those provided by your competitors? What makes you better or different?

One common finding that banks assess once they’ve addressed certain overseas geographies is that the developing countries do not have the proper infrastructure in place to begin with. Hence, their prime focus is to support the development of appropriate infrastructure that can then lead to further business development through the establishment of industries, which in turn will further foster the country’s development.

We nevertheless move in at a later stage in the development cycle. We target the populations and we focus on personal consumer credit products, which is something that major banks don’t do. That is why we do not look upon the major banks moving into these locations as competitors, but rather as potential partners.

All of the other international bank institutions that are moving into these markets focus on infrastructure or industrial projects, and they mainly undergo a ‘one-time/one-shot’ venture that implies credit lines typically ranging from $10 million to $1 billion. We are very flexible in that sense, and through our companies in the region, we encourage individuals access to credit lines that are average of $200 to $300 per person. For the individuals that need to buy expensive equipment, such as agricultural machinery, we can offer hire purchase and the loan amount is up to $30,000, and that is our top limit per client. So, not having other banks addressing the consumer market means no competition for us. Furthermore, J Trust Indonesia does not only focus on microfinances, it also deals in corporate loans from roughly $1 million to $5 million.


How have you been educating the community to understand the way they should approach these micro-credit services?

Our approach comprehends two different ways: on the one hand, we use mass marketing via TV ads and internet based advertisement, which we mainly use in markets such as South Korea. For other geographies, we predominantly address local “opinion makers”, meaning the village elder or the local community responsible.

While large banking institutions invest in large-scale financing opportunities through mass marketing, we use a different approach by performing our local marketing opportunities through “door-to-door” activities.

The technological boom experienced by the remote areas of developing countries has helped us. Since most people have smartphones, it shortens the information access pit between inhabitants of large population centers and the ones from small villages.

People are now able to reach basically the same amount of information regardless of where they live. We leverage that by complementing it with direct marketing actions which have allowed us to rapidly and exponentially raise our client base.

Our business model within these ASEAN countries does not differ that much from the one of Amazon or Alibaba. Technology enables us to create strategic approaches towards the country itself and not specific ones by province or region.

On large developed markets like Japan, all the logistics infrastructure is in place. Therefore, you may simply market your product and the client will find it; but in countries like Indonesia, where the infrastructure is either poor or does not cover the majority of the territory, the first company which manages to create a local e-commerce network will have the advantage.

In that sense, if we are capable of accomplishing just that within the banking context, we will lead the way. Nowadays, banking is not only about the movement of products, but also about  the service arena and about leveraging on e-commerce potential (which Amazon and Alibaba are doing) to enable the delivery of necessary capital to remote clients, therefore allowing them to purchase the products they are in need of.


How are you planning to restructure your business while offering a new range of products?

As a private consumer-focused bank, our products will always be about money. In places like Indonesia, we focus on micro-financing so that people can buy agricultural equipment or supplies. Our actions are aimed at increasing people’s everyday life standards.

Once we have reached that level, we will then move into other portfolio areas, allowing financing towards basic products that are not part of primary needs. That will raise the social pattern in a similar way to what happened in developed countries. Once we get there, we will have to diversify our portfolio offering in order to meet such demand.

Being a corporation that deals with money solutions and services, our profit derives essentially from interest rates. Nevertheless, our main goal at this stage is to support the market (and the people) to develop itself, becoming of higher value both for them as well as towards our future business potential.

Regardless of religion or geography, all humans aim at ameliorating the living conditions of their families, and we have the capacity to support these people towards achieving that. We believe that focusing on such goal will naturally produce revenues and profits.


Which is J Trust’s growth strategy and how does the future look like for you?

Although our headquarters are located in Japan, the economic slow down is making bank suffer. Therefore, our mid-term business plan consists of going through different countries in Asia while replicating the previously mentioned business model. In the future, we may be in the position of supporting other banks’ internationalization process driven by our experience.


What potential do you see in your Accounts Receivable business?

Our accounts’ receivable services are in fact successful, having been praised by the Indonesian government (since it was also an uncommon and non-functional concept for them). We are still in the process of knowledge gathering, but the potential leads us to consider buying some of the existing outstanding receivables accounts portfolio in those countries.

It is nevertheless a maturing process since it depends on serious economic growth, which some countries are still in the process of achieving.

Even in Japan, we purchase NPLs as well as bad-debt collection companies having a very high retrieval rate, which with the exception of similar companies from large banking institutions, makes us market leaders. In fact, we have also been very successful in South Korea.


What is your strategy in order to expand your business model in the region? Are you looking into M&As?

In the case of Indonesia, we already have our bad debt collection company in place. It is ready to  serve the other banks, who reach out to us for the purpose of purchasing their bad debt portfolio, after significant collection experience with our own bank in Indonesia.

We do not generally consider the M&A option unless the target company has knowledge and background experience with the debt market; since from that perspective, it would be essential to incorporate a working team.

So, upon entering a new market, our objective is to establish both the Bank and the Bad Debt company. Although the Bank may prove to be an M&A initiative, the Bad Debt company must be our own doing because we want to instill our “modus operandi”.


What are the main challenges and opportunities that you foresee for J Trust? Is the yen appreciation affecting your business?

The Yen fluctuation is neither a positive or negative perspective. If it becomes stronger, it will allow us to buy other companies, whereas if it becomes weaker, it will foster our business abroad. Being something that is out of our reach and control, the way is to adapt our market investment accordingly.

As an example, we may buy some U.S. Dollars, Singaporean Dollars or South Korean currency, therefore splitting our assets and avoiding significant impact which may derive from such financial currency fluctuations.

If you look at the current situation on the New York Stock Exchange, you will see that stocks at a global level are doing very well. Therefore, an incident like the Lehman Brothers is not foreseeable. Yet, there will be a crash of some sort somewhere down the line and maybe a wise decision is not to undergo any significant investment until such event takes place.


Which would be your advice to those companies looking to enter the Asian market?

Some companies will succeed while others will fail, yet, the CEO must be on the front line. Do not pass the task onto other people; you are the one who needs to go!


What can we expect from J Trust in the near future?

I expect to have an increase in the number of banks and services across South East Asia, while pursuing the same business approach (micro-financing individual clients) and making people happy.

Even though we are different to the majority of other banks, the finance industry is well established, which makes differentiation hard to come by. This means that in two years’ time, we cannot say that something will be significantly different. We must move forward step-by-step and not loose focus.