To Keep the Flow of Money in Our Own Hands

JFS Newsletter No.98 (October 2010)

Bank by Citizens, for Citizens -- NPO Bank

While citizen's participation has been promoted these days in various fields such as the environment, finance is one of the fields that lag far behind in citizen's participation. In Japan, most people think that money should be put in a bank. In fact, according to the survey about the amount of deposits in each kind of financial institution conducted by the Financial Journal Co., deposits in major city banks accounted for slightly less than 34 percent, Japan Post Banks 17 percent and regional banks about 20 percent as of March 2009, reaching almost 70 percent in total.

Meanwhile, data on the loan-deposit rate provided by the Bank of Japan show that the amount of loans and discounts falls below the amount of deposits in all regions except Tokyo as of August 2010. The loan-deposit rate represents the ratio of loans and discounts against deposits. So these data indicate that money in local regions is being siphoned off to Tokyo, which is to say that money in local regions does not circulate locally.

In this situation, a new trend - namely the "non-profit organization (NPO) bank" - is gradually becoming apparent. NPO banks are non-profit financing organizations whose objective is to finance social businesses such as environmental conservation, welfare and community businesses with investments from citizens, NPOs and the private sector.

There are now 12 NPOs in various regions of Japan, and this number reaches nearly 20 if banks under contemplation are included. In the 2000's, NPO banks started to pop up one after another: Hokkaido NPO Bank (2002), Tokyo Community Power Bank (2003), ap Bank (2003), Niigata Community Bank (2004), Community Youth Bank momo (2005) and Kumamoto Social Bank (2008). In 2005, Japan NPO-BANK Network was established to facilitate interactions among NPO banks.

The oldest NPO bank is the Mirai Bank (Future Bank) launched in 1994. The bank, located in Edogawa Ward, Tokyo, lends money invested by members to other members at low rates (2 percent) for three limited categories: environment, business by citizens, and welfare. Starting from 4 million yen (about U.S.$48,000) gathered from 20 members, the bank has about 510 members with the investment of nearly 170 million yen (about U.S.$2 million) as of March 2010, of which 60 million yen (about U.S.$720,000) is now being loaned. The bank has loaned a total of 900 million yen (about U.S.$10.8 million) so far. Most of the borrowers were NPOs.

Links between Money and Energy Circulation

Yu Tanaka, the Executive Director of the Mirai Bank, says that the scale of a local economy can be measured by the following formula: the total money in the community x the amount of money circulation = the scale of the local economy. Tanaka calls for "alternative currencies" to vitalize local communities, due to the importance of circulating money within each community.

Let's take the example of pellets made of wood from abandoned forests as fuel. If we continue to depend on imported fossil fuels as we do today, money in local communities will flow away, and energy circulation as well as money circulation will not be sustainable. If we develop heaters and water heaters that use pellet fuel, we could conceivably create an alternative currency of "pellet postcards," which could be exchanged with 20 kilograms of pellet fuel, for example.

Since the pellet postcard alternative currency would circulate only among people who trust each other, it would be less valuable than yen bills, which are valid all over the country. Many people would use pellet postcards first, and thus the number in circulation would increase, helping vitalize the local community. That's what Tanaka thinks as a win-win approach. By getting back the control of money flow into our own hands, we can also move forward towards a solution for energy issues.

Among measures to reduce the energy consumption at households, the largest-scale way is to change the house itself to an energy-saving one. Based on this idea, Ten-nen Jutaku, an incorporated association, was established to promote ten-nen jutaku, "natural houses" in Japanese. This is taken to mean durable houses that are built using natural materials, with the aim of contributing to environmental conservation as well as to reduce energy costs. When quality lumber is purchased at an appropriate price to build this kind of house, the livelihoods of people who work in forest industry and other related industries can be supported.

Since houses that are more than 20 years old in Japan are evaluated as zero in terms of asset value, the cycle of building houses is extremely short. Trees take many years to grow. When we use wood from 50-year-old trees, we must use it longer than 50 years or forests will be lost. It is said that chemical substances used in newly built houses cause various negative impacts on human health, such as atopic conditions. Natural houses that do not use chemical substances may remain high in asset value even after long use.

A natural house is a little more expensive than the prefabricated houses offered by major housing manufacturers. To support people who want to live in natural houses, Ten-nen Jutaku Bank, an NPO bank, was established in 2008.

Since only about two years have passed after its establishment, there are no cases so far that use funds exclusively from the bank to build a natural house. However, there have been some good examples; one person built his house by combining the NPO bank loan with that of another bank, and other person retrofit heat insulation with the NPO bank's loan, and is paying back his loan more easily since his energy costs were reduced.

Change the World by Changing Bank Accounts

The Mirai Bank, a pioneer of new citizen banks, was created as a result of doubts some people have about traditional financing systems. Its founder, Tanaka, was concerned that environmentally destructive activities and businesses here and abroad were being indirectly supported by the government's Fiscal Investment and Loan Program, which is funded primarily from the nation's postal savings accounts." If things remain unchanged, there will remain the risk that people's money could be used even for war, as seen in the past. I'm afraid that our efforts to protect the environment will be ineffective as long as funds are being supplied for those destructive activities," he thought.

Some other organizations also share this sense of crisis. Among them is "A SEED JAPAN," an international environmental NGO engaged in various campaigns targeting younger generations. Under the catchphrase of "Change the World by Changing Bank Accounts," this NGO has been conducting the "Eco-Money Saving" program since 2003 to create money flows which are good for the environment, people, communities and the society. Through this program, this NGO is proposing a new style of savings and investments. It encourages each person to carefully select financial institutions in consideration of their commitment to social responsibility and contribution to the environment when she or he makes bank accounts or investments.

To promote the "eco-money saving" practice among citizens, A SEED JAPAN launched a campaign called "300 Million Yen Eco-Money Saving Action!" The goal of the campaign was to collect a total of 300 million yen (about U.S.$3.6 million) worth of declarations in which people promise to reconsider which financial institutions they use and put their money into environmentally friendly and socially responsible ones. Asking for participation at various events such as Earth Day, the NGO achieved this goal in September 2005, just seven months after the launch of the campaign. People are still making "eco-money saving" pledges, and declarations from a total of over 1,600 people have amounted to one billion yen (about U.S.$12 million ) in 2010.

Since January 2010, A SEED JAPAN has been running the "Where Does My Money Go?" campaign in collaboration with another NGO, Japan Campaign to Ban Landmines. To change the situation in which our money deposited in bank accounts might be loaned to companies involved in the production of inhumane weapons and the abuse of human rights, this campaign calls on Japanese financial institutions to create standards for loans and investments, and to disclose information. The NGOs have already published an open letter on the social responsibility of financial institutions directed at the three major Japanese bank groups (Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Sumitomo Mitsui Financial Group), which called for the establishment of loan and investment standards.

Cluster munitions are an example of inhumane weapons. With the strong opposition to cluster munitions by concerned countries and NGOs around the world, the Convention on Cluster Munitions (the Oslo Convention) finally entered into force on August 1, 2010. This international convention provides a clear definition of cluster munitions and prohibits all use, stockpiling, production and transfer of cluster munitions.

In response to an appeal by A SEED JAPAN and Japan Campaign to Ban Landmines as well as trends at home and abroad, the Japanese Bankers Association announced in October 2010 that it would not provide any credit as funds for the production of cluster munitions either domestically and internationally. This means that citizens' power is gradually moving major financial institutions.

To create a truly sustainable society by wisely controlling money, and not being controlled by money, we should keep a strong hold the reins on money flows. People can change the flow of money by, for example, paying more attention to the operation of their banks, or using new banking institutions such as NPO banks. We hope that a growing number of people will work on energy issues, revitalization of communities and creation of a peaceful world by changing money flows.

Written by Kazuko Kojima