Kyoto's small producers and traders are fighting back against credit union bust

The Koizumi Cabinet's policy of scrapping credit unions, which is causing small- and medium-sized businesses to go bankrupt, has met with strong resistance in Kyoto where credit unions have a particularly prestigious position in the regional economy,

A struggle by small producers and traders to safeguard their business from the failure of two credit unions is now under way, with the help of democratic organizations and the Japanese Communist Party.

A credit union is a financial institution run by a cooperative body, the aim being to help small businesses. It is governed by the credit union law of 1951.

In January 2000, Kyoto Miyako Credit Union from which Mr.A, a plumber for nearly 20 years, borrowed money, went bankrupt. It was just when Mr. A was negotiating with the credit union about repaying in installments his 23.5 million yen loans for operating funds.

Mr. A was rated as a "bad risk" and was not carried over by the bank which took over the failed credit union. He was turned over to the Resolution & Collection Corporation (RCC), a semi-public company specializing in the recovery of loans. As a result, there was a decision that the mortgaged home/workshop of his and the home of his guarantors be put for auction.

In the last two years, more than 3,000 small- and medium-sized businesses were put in the hands of RCC, although they were regularly repaying their debts without fail. In the business world it was common sense that going to RCC means "it's all over."

Refusing to accept such a view, Mr. A consulted with democratic business organizations, a trade union organization, and the JCP. There were over 400 such consultations.

In the parliament, JCP House of Councilors member Nishiyama Tokiko demanded that the government stop driving small businesses into bankruptcy. Matsuda Noboru, director of the Deposit Insurance Corporation, replied that it was possible to alter conditions for repayment so as not to resort to forced auctions.

Mr. B (who sells kimono) got a concession that all he has to pay for the year is interest on his debts of 6.4 million yen. Mr. B said, "Now my business is restored to a break-even point. I want many people to know that there is a way if you fight back."

Yamashita Yoshitaka, a real estate dealer for some 40 years, joined the democratic producers and traders organization, as he was enraged at the government policy.

Despite his regular monthly repayment of 1.7 million yen, he was sent to RCC, and was consequently denied any new loans. He said, "Under the present economic recession, any sound and honest business can go into the red. If all such businesses are destroyed as bad debts, what will happen to the local economies?"

He added, "The government protects major banks and large corporation with tax money. Small businesses must now join hands, speak out, and fight back."

Fujita Hiroshi, deputy secretary of the Kyoto federation of traders and producers organizations, said, "Our struggle has ended the common belief that RCC means 'it's all over.' This is because our struggle is based on the common agreement between the parties concerned that the local economy and business must be defended by all means."

Fujita added, "After credit unions went bankrupt, some small businesses have no choice but to go to loan sharks for loans. Governmental financial institutions should arrange a new system to provide them with loans. There is a pressing need to establish a regional financial system that meshes well with the actual situation for small businesses." (end)