Hello, everybody. My name is Yamamoto. I'm a "salaryman".
It's a little awkward to stand here at TEDxKyoto Change -
- after listening to all the amazing speeches from Berlin, watching the passionate presentation by Ms. Doi, and later we have Ms. Sako’s speech.
I’m merely a securities man. It’s kind of ‘risky’ to have me.
In baseball, sometimes you get two strikes but then the batter hits the third pitch, right?
So today, please be relaxed and take my speech as a ‘throwaway pitch’.
Many of you may believe that investment and social contribution are concepts totally opposed to one another, like oil and water.
That may not be completely wrong,
but it’s also true that we need financial support when we want to change the world, like how the TEDxChange Berlin wouldn’t have been able to be carried out without funding,
or the activities Mrs. Gates is working on are backed by the profit from Microsoft through the Bill and Melinda & Gates Foundation.
We can never ignore the significance of money,
and everyone here in this hall has money.
I was cringing while listening to the criticism
of financial institutions in the speech today from Berlin,
but think about it: we are the ones who save money in these financial institutions.
So, if every one of us pays attention to where our money goes and for what it is used, we could avoid financial institutions going out of control.
Please keep that in mind when listening to my speech.
Look at this number. There are too many zeros, and you can’t really feel how big it is.
It's a quadrillion.
I’ve never needed to handle such a big number. Seventeen quadrillion yen,
or, converted, 212 trillion dollars.
This is the balance of the world's total financial assets,
so that much money is on markets every day.
Is it difficult to imagine? If you pile up this much money using 10,000 yen bills,
which are 0.08-millimeters thick, then it's eleven times as long as Earth’s outer circumference.
Using 50 dollar bills, the distance will be as far as the distance between the earth and the moon.
Now, the question is: Since when have we had this much money?
Now look at this chart. This shows the world’s population, GDP and the world’s total financial assets twenty years ago.
This is an estimate of that amount five years later, ten years later, fifteen years later, and now.
As you may have noticed already, the red index shows the world’s total financial assets. It’s in a danger zone.
Personally, I don't see the immensity of financial markets alone as an absolute vice,
as long as the wealth is distributed equally to all the people around the world.
What’s happening now, however, is that only 1% of the people in this world control some 20% of the whole earnings, and control 40% of the world’s assets as a whole.
We have to admit that something is going wrong with the redistribution of wealth.
Rather, why don’t we use just one percent,
or even 0.1 percent of our earnings for social issues since we have as much as 212 trillion dollars?
I believe that this can change our world.
Well, it’s actually a controversial issue and there are many discussions going on about
whether we should allot investment capital for social issues.
But I believe we need to take some action.
I’d like to give you one example.
Many children are dying due to lack of vaccination,
especially in southern Africa.
Various actions have been taken,
and one of them is the alliance called GAVI, which was founded in 1999,
supported by 750 million dollars for its endowment from the Bill & Melinda Gates Foundation.
GAVI gathered 3 billion dollars of donations from all over the world in 2007,
but this is still not enough.
If you think about it, sending vaccines to the ports in some developing countries is not enough.
For example, if you were to send frozen candies, they would melt by the time they would be delivered to each village.
It's the same story for vaccines.
Sending vaccines to the ports is not enough.
We need some logistical support to keep them cold throughout the delivery process.
Moreover, candies can just be eaten,
but vaccination requires more than that. We need medical staff and salaries for them.
GAVI was still far short of capital,
so IFFIm was established to provide financial support to GAVI.
The amount of capital they raised has increased as much as US$5.2 billion in 2009.
You might think that this would be enough, but financial restriction hasn’t been solved at all.
The donations are paid in installments,
for a maximum of 20 years, and those donations, or ODA, are originally taken from tax money.
Governments pay in installments
because they cannot afford the entire amount in a single year.
On the other hand, a huge number of children are already in danger,
or in worst cases, dying due to lack of vaccination.
So, financial and development experts around the world have been discussing ideas to -
- receive donations now from future installments.
As a result, they have developed a financial product called “vaccine bond”.
This is how it works:
the green bars indicate the amount of money the IFFIm received from investors by issuing vaccine bonds,
and the IFFIm can use this amount immediately.
Of course, they have to return the capital to the bondholders by the due dates.
Since ODAs are legal commitments by governments, the bondholders do not need to bear too much of the risk of defaulting.
This kind of fund-raising mechanism has drawn attention not only in the financial market, but also on the development field.
Since its inception in 2006, a total of ¥350 billion Japanese Yen has been raised.
Please be proud of yourselves, that a half of the bonds issued were purchased by Japanese individuals.
There is a case study,
indicating that Daiwa Securities was the first to bring the “vaccine bond” to Japan,
and about 120 billion yen worth of bonds have been purchased, which is being put to use in helping the entire world.
Another solution I’d like to introduce is microfinance.
For those who are not familiar with microfinance, this is how it works:
it’s a system to offer financial services to those people who conventionally do not have access to them.
It’s not a grant; it’s a business.
For instance, the microfinance scheme offers a small amount of money as a loan.
So why financial services? In short, providing financial services is just like securing basic human rights.
Imagine if you suddenly lost your savings, your bank account was blocked,
you can’t transfer money, you don’t have any insurance, or you can’t have a credit card. You can’t live a modern life.
However, most people in developing countries don’t have access to those financial services.
So various efforts have been made in order to let those people have access to financial services since the 1970s.
And what is interesting is that this is being done not as volunteer service, but as a business.
There is even an organization that won the Nobel Peace Prize by deploying a microfinance business.
But how do those organizations raise capital?
Remember that Japanese individuals have total of 1.5 quadrillion Japanese yen in financial assets.
If we could spend even a little amount from this, that would still make a big difference.
Also, investors feel comfortable investing in active businesses.
So, if we could tie these two resources together, Japanese people can contribute to the world regardless of where they are.
This is why I started thinking of introducing microfinance to Japan.
However, there are still objections to solving poverty with invested money.
Actually, I recently went to a developing country.
Look at the contrast between the slum area and the luxury apartments.
But this contrast is is not the main message of this photograph.
This is an aerial photograph, but I didn’t hire a helicopter or anything.
This was taken from a meeting room of a world-famous NGO when I had a meeting with them.
You can see a shadow in the bottom-right part of the picture. This is the NGO’s headquarters.
Well, this NGO has received a great reputation from all over the world, but just one step out of its office, and you can still see these contrasts of the slums and modern apartments.
Facing that reality, I realized that I can’t be just sitting idly and lamenting the situation.
So I started to search for something I could do.
Of course I didn’t expect microfinance to be a business from the beginning.
But my turning point came when I had an opportunity to study at
UC Berkeley in the San Francisco Bay Area from 2005 to 2007.
At UC Berkeley, there are many students who are thinking of making impact on the world.
For example, the person who was sitting next to me in class had started an NPO, but it failed.
He told me that he had passion to do the project, but didn't have the actual skill to execute his plan, so that was why the non-profit failed.
Without any accounting, strategy, finance, and management skills, it was just impossible, he said.
So he decided to study them in business school, and, with these skill sets, decided to restart his own NPO.
In a situation where people surrounding me were taking actions, I felt a strong urge to start something.
It was around that time when a Stanford student started a project
of connecting the dots between microfinance and investors online.
When I found out about it,
I decided to bring this idea back to Japan.
I requested the proposal at my company, but it was rejected numerous times.
Looking back, it was obvious that Japanese people would not invest in microfinance,
as they knew nothing about it.
Despite this reality, I wanted to start a new online business. But of course, initial and running costs are essential,
and there was no guarantee that revenue would be generated. My business plan was not properly informed.
I had passion, but without much revenue stream, there was no way my company would invest in my proposal.
I took a step back, and emptied my head.
There is no reason for me to do anything fancy when starting a new project.
A business starts by asking the question "What does the client want or need?”
So I decided to start by doing what I can do.
When I was taking bath at home,
I suddenly realized that one of the hot-selling items at that time was foreign currency-denominated bonds issued by multi-national organizations, such as Asian Development Bank and the World Bank.
For clients who can take exchange rate risks,
it was just like buying almost-risk-free bonds denominated in foreign currencies.
However, other competitors had already landed on that idea.
I noticed that the seed money poured into microfinance organizations
came from international organizations, such as Asian Development Bank (ADB) and the International Finance Corporation (IFC).
So the solution is to make ADB and the IFC
publicly state that the money collected in Japan will be invested in microfinance.
This wouldn’t be a problem because individual investors are interested in foreign currency investment.
On the other hand, people who are interested in microfinance and are new to security brokers would select this product as well.
I found that such people
would create a revenue stream for the company.
From that point on, the company gave us the green light, and we established the "IFC Microfinance Bond".
This was in November of 2009.
The project was a huge success, with over 10,000 private investors buying 25 billion Japanese yen.
From that point on, it just kept coming,
and now, we have collected 500 billion Japanese yen in total.
Our scopes spread beyond microfinance and became more and more diverse.
Other security brokers also launched similar products.
The market is becoming huge. That’s a good thing. But one important point, I think,
is that there are more people caring about where their money is invested.
The core problem of the sub-prime loan crisis that happened from 2008 to 2009
was that people weren't thinking about where their money was being invested and how it was being used.
If there were an AAA rating and the return on investment was good, people would invest.
They didn't care where their money was going.
We feel that it is natural to keep our money in bank accounts. Of 1.5 quadrillion Japanese yen of Japanese people’s financial assets, 800 trillion is in banks,
400 trillion in insurance, and about 600 trillion in the Japanese Government Bonds.
In other words, even if we say that the Japanese government lacks fiscal prudence, we are financing them, indeed.
Maybe we should care more about where our money is reinvested.
It's just like when we go to supermarkets and buy something,
we naturally check the labels on food products and find out where they were produced.
The same thing can be said for money. You don't have to think too seriously about doing social good if you think about where your money will end up and how it will be used from the beginning.
If your money goes to the place you desire, as a result, there will be a “return” of sorts.
I talk about these things at various seminars.
Last November, when I spoke, I got many comments.
"Your talk was wonderful. I wanted to hear more." - Thank you.
"Your talk was very easy to understand. Daiwa securities is amazing." - Thank you.
"Thank you for giving us such a exciting talk on investment.
I work closely with NGO's, and it's such a relief to have a system like yours to catch up and support the harsh reality." - Thank you.
"I want to buy from at least 1000 yen." - You can buy from 1000 yen.
"I have always thought of social good and money as two completely different things, but I was able to learn many things from your talk." - This is what I was expecting to hear.
"I was motivated" - I was thanked twice. I’m happy to speak about it.
Too much advertisement, and your explanation is too long. " - He was a securities salesman,
but he listened to my talk until the end.
37 men and 40 women participated in the seminar.
It was reviewed well, and how many do you think invested?
Just 1 person.
Here I am talking in front of you, but I doubt that even one out of all of you would invest.
Let's change the situation.