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Banking industry

ShinGinko Tokyo to Outsource Corporate Loan Operations to Insurance Companies

Strategic Insights

— 1 min read

ShinGinko Tokyo, the bank in which the Tokyo Metropolitan Government owns a stake, plans to outsource the marketing of loans for small and midsize companies to Aioi Insurance Co. and AIU Insurance Co. The bank aims to expand its customer base by tapping into the expertise of the two private-sector insurance firms, which have a strong presence in the small and midsize corporate market.

Key Takeaways:

  • ShinGinko Tokyo will ask Aioi and AIU to serve as intermediaries for loans by having their marketing staff offer loans to small and midsize corporate customers alongside their insurance products.
  • The insurers will receive commissions for helping to market the loans, and Aioi and AIU will be able to generate commission income by working with the new bank.
  • ShinGinko Tokyo will target segments that have not been tapped by private-sector financial institutions by providing unsecured loans with annual interest rates of around 2-8 percent and no requirement for a third-party guarantor.
  • The partnership will allow Aioi and AIU to market their own insurance products, such as protection against loan defaults, to ShinGinko Tokyo's customers.
  • The collapse of loan defaults will also provide an opportunity for Aioi and AIU to provide additional financial security to their customers.
  • The Financial Services Agency still needs to approve the tie-ups, but it is likely that the partnership will begin as early as next fiscal year.

Statistics:

  • ShinGinko Tokyo plans to begin operations next April with six branches.
  • The bank will provide unsecured loans with annual interest rates of around 2-8 percent and no requirement for a third-party guarantor.
  • Aioi and AIU are expected to receive commissions for helping to market the loans.
  • The revision to the Insurance Business Law in June 2003 allowed insurance companies to act as agents for banks.
  • Mitui Life Insurance Co. is already handling mortgage-related operations on behalf of Sumitomo Mitsui Financial Group Inc.

Sources:

  • "ShinGinko Tokyo to tap Aioi, AIU for loan marketing" (The Nikkei, December 28, 2003)

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