金城 亜紀

Asset Based Lending (ABL) is a lending technology that uses business assets, such asinventory and accounts receivable, to secure a loan. ABL is an established form of lending in the US, but was only recently introduced to Japan. Like all secured lenders, ABL lenders have the right to repossess and liquidate collateral. I argue that when business assets such as inventory and accounts receivable become collateral there is an additional role. This paper demonstrates through a case study that ABL increasesthe frequency of contact between lenders and borrowers. Because of this frequent contactwith the borrower prior to and after the loan is made, ABL facilitates the lender in generating information about the creditworthiness of the borrower. Furthermore, because the value of the collateral used in ABL is directly linked with the business of the borrower, properly monitoring the collateral helps the lender manage the credit risk. This is why ABL is an important lending technology for Japanese banks. This paper articulates the unique characteristics of ABL and the implications they have for Japan's lending market by (1) discussing the role of collateral by reviewing related literature, (2)presenting a case study conducted with a Japanese regional bank, (3) comparing how regulators treat ABL in Japan and the US, and (4) concluding with policy recommendations to furtherpromote ABL.

The Japanese government has been promoting a type of secured lending that usesinventory and accounts receivable ascollateral. It is generally called "Asset Based Lending", or "ABL" in Japan. Interms of lending technology, some argue that "ABL" is transactions lending, while others argue that it is relationship lending. This paper, through a case study with a Japanese regional bank, provides empirical evidence that the majority of so called "ABL"in Japan is not transactions lending. In doing so, this paper identifies four features (appraisal, advance rate, borrowing base and monitoring) that characterize" ABL" as transactions ending.Outlining these features demonstrate how such lender manages the credit exposure of the loan in accordance with the liquidation value of the collateral. This paper finds that the majority of "ABL" loans do not possess such features, indicating that they cannot be categorized as transactions lending. Specialization in lending technologies and lack of sufficient otection of lender's security interest in the collateral during bankruptcy proceedings may be the reasons why banks in Japan are reluctant to conduct "ABL" as a form of transactions lending. The paper argues that it is incorrect to call every secured lending that uses inventory and accounts receivable as collateral, "ABL". Only such loans that qualify as transactions lending should be categorized as asset-based lending, or ABL, which is how this terminology is used outside of Japan.