Private funds to help solve social issues in Japan

August 22, 2017

TOKYO- The so-called social impact bond scheme designed to tackle growing medical expenses and other social problems through private-sector investment is starting to fully spread in Japan.

Under SIB, which is attracting attention as a new form of public-private cooperation, the amount of returns paid by administrative authorities to investors is decided depending on the results of projects involved while financial institutions and other investors take risks.

SIB, initiated in Britain in 2010, has spread mainly to other Western countries.

In one case in Japan, Sumitomo Mitsui Banking Corp. joined a project to reduce the number of dialysis patients, which was launched in July by the city of Kobe, the capital of the western prefecture of Hyogo. Sumitomo Mitsui Banking and individual investors will provide a total of some 30 million yen to private companies that give health advice to diabetes patients.

A third party will check whether such advice helps prevent worsening in their symptoms. If results are achieved and the city's medical expenses are curbed, the investors will receive returns that are larger than their investment from the municipal government.

With annual medical costs for each dialysis patient totaling as much as 5 million yen, the project could be very helpful for Kobe.

The municipal government of Hachioji in Tokyo will make use of SIB for bowel cancer checks for fiscal 2017. Funded by investors including Mizuho Bank, the project will aim to find cancer at early stages by increasing the number of people who take checkups.

Under SIB, payments of returns by local governments will be lower if the effects of projects are smaller. It is thus easy for local governments to start projects to resolve social issues without worrying much about financial burdens.

An official at Sumitomo Mitsui Banking said that the scheme is expected to spread further as it can be utilized in not only the medical and health but other fields. Jiji Press