Community Foundations and Social Investments in Japan
A discussion on Japanese modern civil society would be incomplete without the mention of the 1995 Great Hanshin-Awaji earthquake. The giant earthquake not only inflicted enormous damage, with casualties amounting to over 6400, but also exposed the fragility of the many different things developed in pursuit of convenience and comfort, which in the past were believed to be part of an effective system. It is said that during the first three months following the earthquake, roughly 1.17 million people served as volunteers in the disaster-hit areas, and 1995 is often referred to in Japan as the starting year of volunteerism. Non-profit activities, which were institutionalised in Japan three years after the 1995 earthquake, have also undergone significant changes. This chapter provides an overview of the transformation of the Japanese society in the context of “the Great Hanshin-Awaji earthquake” by exploring several topics related to civic activities, including community foundations and social investments.
A discussion on Japanese modern civil society would be incomplete without the mention of the 1995 Great Hanshin-Awaji earthquake. The 7.3 magnitude giant earthquake, which occurred directly underneath a metropolitan area, inflicted enormous damage, with casualties amounting to over 6400. It also exposed the fragility of the many different things developed in pursuit of convenience and comfort, which in the past were believed to be part of an effective system.
Social action programmes and non-profit organisations caught on, ironically, in the aftermath of the Great Hanshin-Awaji earthquake and revealed the following: the fragility of the system (mainly public administration) that was constructed in the postwar era, particularly the period of high economic growth beginning in the 1960s; the viewing of citizens who receive the full benefit of public services strictly as consumers (free riders); and the functional and physical limitations of the public sector. The civic activities that were carried out in the years following the Great Hanshin-Awaji earthquake, which involved creating communality while overcoming hardships, demonstrated that the “civil society” does indeed exist in Japan and that it was not a theory-based myth. Such activities can be described as having a social impact comparable to the Revolutions of 1989 following the collapse of the Berlin Wall. It is said that during the first three months following the Great Hanshin-Awaji earthquake of 1995, roughly 1.17 million people served as volunteers in the disaster-hit areas, and 1995 is often referred to in Japan as “volunteer gannen” (the starting year of volunteerism). Then, in 1998, the Act on Promotion of Specified Non-profit Activities (NPO Act) went into effect in Japan through lawmaker-initiated legislation, and the developments that led up to the public interest corporation reforms of 2003 were established as a core component of the trend in which citizenhood served as the backbone of public spaces and gradually became ingrained in society. Furthermore, the “lost 20 years”, which resulted from the deflation following the collapse of the economic bubble, significantly transformed the Japanese society. It was a quest to redefine full-fledged capitalism and can also be described as a departure from economy first policies as well as the pursuit of a new vision of capitalism.
Non-profit activities carried out in Japan, which were institutionalised following the Great Hanshin-Awaji earthquake, have also undergone significant changes. This chapter provides an overview of the transformation of the Japanese society by exploring several topics related to civic activities carried out in the years following the earthquake.
17.2 Japan’s Declining Population and Community Foundations
Japan’s declining population and the resulting structural changes have impacted local communities. Such developments reveal how difficult it is for communities to exist. Japan’s super-ageing society, which came about following a population onus beginning in the 1990s, has begun to experience difficulties in maintaining various systems, such as the social welfare system, which was designed based on the population bonus period, a time when the productive population continued to grow. In fact, Japan’s rural areas, which include low uplands, have faced the most difficulties. These areas saw a population decline as well as structural changes earlier than anywhere else. Among the difficulties were personnel cutbacks and a decline in tax revenue faced by local government bodies which had tackled community issues to date, as well as the diversification and quantitative growth of citizen needs, and the emergence of new challenges resulting from rapid demographic changes. Such issues cannot be resolved by local governments alone. Societal demand for voluntary activities carried out by citizens will grow more than in the past, and social enterprises will likely expand their range of activities. However, I get the sense that the definitions of “past” and “future” are undergoing drastic changes. With respect to the “past”, the “collaboration” policies, which were significantly influenced by the policies implemented in the United Kingdom from the late 1990s to the 2000s, have served as a means for outsourcing duties to the non-profit sector, in the light of the era of economic stagnation (the lost 20 years) following the collapse of the economic bubble, as well as the resulting decline in tax revenue and the diversification of challenges. At the same time, these policies have generally tended to be used for providing administrative services. In other words, they are the “past policies” regarded as complementary functions for local governments. In the context of sustaining life, as described earlier, there is growing anticipation of a new system designed to sustain society (in a supplementary role) that will play a central role in efforts for value creation and social innovation. Let us now examine the activities carried out by civic community foundations, which have begun to gain force in recent years in the light of such circumstances.
Procures funds for its basic capital as well as subsidy capital by asking for donations from a diverse range of citizens, companies, and the like.
Exists independently from the government, municipalities, as well as specific companies, organisation, or individuals, and strives to serve as an aid foundation that is trusted by the local community through active efforts to disclose information as well as run the organisation with transparency.
Strives to create an environment which allows a diverse range of people to participate in community development activities as well as tries to resolve community issues by asking for donations through various means such as taking full advantage of the donation tax system, while backed by a corporate status that has high public benefit such as a public interest incorporated foundation or authorised non-profit organisation.
Is rooted in the community, has a multilateral and comprehensive understanding of community issues, brings together various community resources, and brings out the strengths of the citizens in local communities.
Strives to support public interest, community development, and community activities in which “people” play a central role (e.g. companies, non-profit organisations, and the like).
Makes every effort to respect the wishes of the donors and has established a system for achieving that. In addition, the recipients of the donations are not fixed, and the foundation has put in place an equitable selection process involving various stakeholders.
These six items have also been adopted as CFJ standards.
17.3 Civic Community Foundations That Support Citizenhood
The main activities carried out by civic community foundations are to collect donations and provide subsidies to civic activity organisations by using the collected funds. Here, I want to examine the significance and role of these activities which on the surface appear to be simple.
First, let us take a look at the role of civic community foundations as organisations that support citizenhood. In our society, social values and challenges change along with the passage of time. For many years, particularly in Japan, the public sector was bloated due to its economy first policies, partly because matters concerning public spaces were entrusted to the government. Consequently, there was a tendency for the responsibility regarding matters that serve the public interest, more often than not, to end up all in the hands of the government. But government bodies can only act according to law and cannot attend to newly emerging issues or those that are deemed to be too early to address. Sadly, the structure of our society, in which the funds used to help resolve societal issues are concentrated in government in the form of tax, is such that the government “allocates” funds to the civic organisations. There is therefore no alternative but to depend highly on municipal authority and management (discretion) when allocating funds. As a result, there is a danger that civic activities and public administration will continue to “homogenise” and a style of civic action in which the citizens constantly check the well-being of municipalities will persist. Therefore, if outsourcing, aid, and subsidies carried out by the public administration make up a major component of the business model used by civic action groups, citizenhood will be lost once again. Donations that bring out this citizenhood play an extremely vital role in the Japanese society today. Donations are a means of resolving social issues and are also a way for citizens to participate in society. I also believe that donations are a civic right. Creating ties between such donations and the local communities that exist in Japan today is another vital role carried out by civic community foundations.
A civic community foundation in itself can merely exist as “an organisation”. This is because, unlike major aid foundations (many of which are corporate-funded in Japan), civic community foundations cannot own large sums in endowments and thereby cannot necessarily provide subsidies using operating profits. It is the existence of donors (who represent the citizens) that creates an impact. In that regard, the methods used to encourage people to participate in the donations become key. Furthermore, in the context of communities, the participants are not all individuals. The role of companies becomes key as well.
Civic community foundations serve as the backbone of the problem resolution alliance and come up with various ways of social participation as well as acting as a go-between for that alliance. A prime example of this is the “Kanpai Charity”, which has been held by several civic community foundations across Japan. In the programme, restaurants in the community are asked to participate, and each vendor is to come up with and provide a charity menu. For instance, restaurants that ordinarily serve draft beer for 400 yen will charge 450 yen and the additional 50 yen goes to donations. The restaurants also pitch in by doing such things as serving small dishes to express their desire to cooperate. The donation amounts, the recipients, as well as what the funds will be used for are all shared with those in attendance so that the vendors are able to choose in advance the social action programme they want to support (the donation recipients). Vendors, by cooperating with the businesses, are able to broaden “the opportunities to participate” in donations to a wide audience through their core business. In addition to creating opportunities for potential donors to participate, the programme gives businesses the opportunity to serve as leaders representing the business side. The staff at vendors participating in the “Kanpai Charity” programme, when taking orders from their customers, tell the customers about the programme’s activities as well as the activities carried out by the non-profit organisation(s) that the vendor is supporting to encourage people to donate. I witnessed this take place first-hand. In other words, the staff, at that particular moment, were serving as Non-profit organisations (NPO) fundraisers as well as encouraging people to donate. It can be said that civic community foundations must be able to bring out the sociability and abilities of the companies and businesses.
17.4 Civic Community Foundations and Their Social Impact
Civic community foundations engage in efforts to visualise community issues in detail. They identify the issues by investigating the current conditions and by conducting interviews with the persons directly affected by the issue(s), and they also analyse the problem structure and identify the causes. They also organise concrete data on community issues in a way that is easy to understand and transmit the data so that it can be shared among community residents. In addition, they actively hold round-table discussions, in which the data are used as a major tool. Creating “opportunities” for community residents to share the issues they are facing brings together the stakeholders who have their eyes set on resolving the issues, allowing them to circulate and share information. In the round-table discussions, the stakeholders share their wisdom with one another, devise a system as well as a plan for resolving community issues, and also come up with an action plan. In other words, it can be said that one of the functions of civic community foundations is to serve as a think-tank for the community and create business opportunities. Once concrete activities begin, civic community foundations collect donations from the citizens and support their activities. An example of a project carried out by a civic community foundation is the Gion Matsuri Gomizero (Zero Waste) Project.
Gion Matsuri, which is held in Kyoto, is one of Japan’s most well-known festivals. It dates back to the ninth century, and over one million tourists from around the globe attend the festival. This festival is the pride of Kyoto. But there is a serious problem: waste. It is said that 60 tons of waste is produced each day during the period of Yoiyama (the three evenings of celebrations preceding the festival). A large quantity of waste is scattered about the streets, where the pedestrians’ paradise area has been lifted, and all-night cleaning takes place. Citizens with concerns over such circumstances took the initiative in analysing the problem, gathering information, recruiting stakeholders, and forming the Gion Matsuri Gomizero (Zero Waste) Project Planning Committee. The project involved providing yatai (street vendors) who line the pedestrian paradise with recycled eating utensils in order to reduce the amount of waste. The programme was implemented not only to provide instruction on how to sort the waste but as a measure for coming up with a new solution to social issues. The civic community foundation raised and provided the necessary funds to cover the costs of the recycled eating utensils as well as any other costs required on the day activities would take place.
What is noteworthy here is that members of the waste service company union, who supported the aims of the project, carried out these activities as a collective effort. Ordinarily, for waste service companies, the more waste there is, the more work they get, and the more money they make. From the standpoint of conventional economic rationality, the idea of a waste service company working to reduce waste is clearly absurd. Nevertheless, in discussions concerning the Gomizero Project, the value of pursuing sustainability was shared, which transformed the traditional paradigm, motivating members to carry out the project. This experience allowed the participants to discover the potential and the function of civic community foundations. Civic community foundations all across the country have begun to support the base of such activities (both financially and non-financially) and now serve as a hub that actively promotes social change.
These activities can be characterised as follows. First, they are dramatically changing how subsidy programmes work. The traditional approach can be described as an application-based subsidy system which is based on the wishes of the applicants. However, in these activities, it can be said that the foundation is carrying out activities before there are specific applicants or before the details of the activities have been decided.
In other words, the goal of community foundations is not necessarily to “provide subsidies” or “allocate funds”. Carrying out on-site measures—such as the reassembly of information and resources aimed at resolving community issues, as well as empowerment and capacity building, which often end up being reactive measures—in this manner, in cooperation with and concurrently with non-profit organisations, is what creates the social impact. This is the value of civic community foundations. This type of non-financial assistance is more important than the amount of the subsidy.
Community foundations, by taking advantage of their innate features, are also beginning to provide support services (while still at a small scale) during times of disaster. For instance, in the aftermath of the Great East Japan Earthquake, a project called “Tsunapuro” was put together. Its aim was to provide care for minorities requiring more assistance following a disaster. In a disaster, everyone becomes “disadvantaged” and requires assistance. Even under such circumstances, however, pressure to conform does exist to a certain degree. For instance, in evacuation shelters, the family members of children with developmental disabilities are often neglected. Staying in an evacuation shelter is extremely rough. Personal space is limited, there is no privacy, and those staying in the shelters suffer from exhaustion, both physically and mentally. Under such conditions, children with developmental disabilities who may suddenly cry out are unconsciously neglected along with their family members. Such people are left with nowhere to turn to, and even obtaining information becomes a struggle. Persons with disabilities are not the only people that require assistance. They range from those with dementia, allergies, the elderly, and also foreigners. Special needs are difficult to identify, particularly when all affected persons require assistance, making it difficult for those who require special assistance to ask for help. In the “Tsunapuro project”, volunteers assessed the conditions in each evacuation shelter and identified special needs so that those who required special assistance could get the help that they needed. It was a civic community foundation that supported such activities carried out by citizens.
17.5 Building a Local Financing System Through Social Investments
In the past, “investment practices” were evaluated based on the financial rate of return. The current approach, however, involves a combination of social profitability and financial profitability. At the 2013 G8 Summit, British Prime Minister David Cameron, who was acting as the chair, called on nations to form a Social Investment Task Force. By 2014, task forces had been set up in each country.
Local communities in Japan do not lack financial resources. One main type of regional financial institution in Japan is the credit union. Credit unions are financial institutions that benefit the communities. They can only be operated in certain regions, and loans are only provided to small and medium enterprises or individuals. The loan-deposit ratio for these credit unions has dropped by over 20% in the past 15 years. Statistical data show that the surplus funds resulting from the decline in loan-deposit ratio are being spent on government bonds or the like. Community funds are not being circulated within the community and are leaving the community. Moreover, it is possible that if a social investment environment is created, which in turn prevents funds from leaving the community, creating an environment that allows funds to flow easily into programmes aimed at resolving community issues as well as social businesses, it will enhance community autonomy.
In examining the social investment era, several issues become apparent. Obviously, organisations that have invested social resources must produce results. How to go about achieving this is the major challenge. There is a need to examine the issues scientifically and to develop a process for identifying the causes and solutions, rather than carrying out activities based on emotion and self-satisfaction alone. Japan’s urgent challenge is to build a system in which operating resources are made available to those organisations and businesses which aim to bring about social change with an emphasis on producing outcomes.
There is a need to integrate such things into an ecosystem. I call financing that tackles the issue of community sustainability “local financing”. I believe that local financing has the potential to transform the existing role and function of each sector. In essence, local financing ensures that the funds that are provided by each central player prompt each project implementing body to take the initiative to act and transform its role or identity, rather than simply creating a cash flow. This can be described as a style of financing in which industrial waste treatment companies facilitate the creation of new value by transcending conventional economic rationality like in the example of the Gion Festival Gomizero Project. In the past, there were divisions between sectors, and between profit-oriented organisations and non-profit organisations. In other words, it can be said that community projects had been divided by their corporate status and underlying principal philosophies. For instance, companies are generally regarded as being part of the profit-oriented sector and that their only interest is increasing profits. In other words, their behaviour is driven by capitalism. However, it is now becoming increasingly difficult to place all companies into a single category in this manner. Why is it that companies that are deeply involved with the community or executives of such companies become actively engaged in community development and public interest activities? It is difficult to explain their thought process not only from the standpoint of conventional capitalism-based principles of behaviour but also from the perspective of corporate social contribution or social contribution in general. In other words, if it is determined that “a project”, particularly in a community that is experiencing a sharp population decline, is necessary for sustaining life in the community or the local economy, a construct in which the project is supported by community residents has the potential to exist, even though the economic return may not be very high. From that regard, while this may be a stretch, there is a potential for companies to exist that would engage in active efforts to collect donations. I believe that the strength, and main function, of local financing is that it frees companies from their traditional classifications and transforms their roles into implementing projects in which community residents play a central role. This notion is not limited to the corporate sector. For instance, local financing has the potential to transform the role of chien soshiki (local organisations), which are autonomous community organisations. Traditionally, chien soshiki have been organisations that hold traditional events and festivals. They hold events and festivals throughout the year in a way that has been decided in advance. They also had played a role in building consensus within municipalities. However, in looking at the activities carried out by chien soshiki in recent years with regard to enhancing community sustainability, the focus has shifted from traditional events and festivals to projects. They are beginning to provide services that are necessary to raise the quality of life and to enhance sustainable living in communities in light of the circumstances in recent years. Financing, which actively facilitates and accelerates such activities, is one of the functions of local financing.
17.6 The Transformation of Autonomy and Social Investments
Similarly, social investments have the potential to transform the role of programmes implemented by municipalities. That is to say, the development of model projects that utilise community funds, in other words, those that involve combining social investments with public funding, may create a new autonomous project model. One example of this is Social Impact Bonds (SIBs), which have attracted much attention in recent years. The “Outcome-based Subsidy Program”, which was implemented in Higashiomi, Shiga, where active measures have been taken, touched off by SIBs, provides some major insights. In this programme, the capital is procured through social investments made by the citizens, which is then provided to businesses in the form of a subsidy. If it is determined that a business has achieved a desired outcome, a goal that has been set in advance, municipalities are to provide the citizens who have made contributions to the business with funds from the amount in the budget allocated for subsidies.
Higashiomi is the first case in Japan in which a municipality utilised social investments made by its citizens. This example demonstrates the following when considering issues such as community autonomy and social investments. First, the citizens were serving as investors. The citizens, who served as investors and were moved by the project background, the need for the project, as well as the personalities of the people involved, came up with the funds for the project and provided not only financial assistance but also non-financial assistance. The investment activities made the citizens feel that they were central players and created a sense that they were co-producers through direct and indirect involvement. This made it a beneficial experience not only for the investment recipients but also for the investors. A certain female investor referred to this as “a way out of voicing your opinion”. Even if you want to cooperate with community improvement projects, getting involved and voicing your opinion involve adversity. By serving as the investment providers, the citizens were able to participate actively. Calling for investments involves talking to various people about the issues, both big and small, or about the central players involved in resolving the issues. In other words, it involves serving as speakers. This means that social investments, depending on how they are designed, have the potential to serve as a valuable tool for social participation.
One more major change was observed from the activities carried out at Higashiomi: the transformation of the policy formation process used by municipalities. When implementing an outcome-based programme, the applicable implementing body must be able to achieve the desired outcomes. It goes without saying that municipalities, in order to seek a desired outcome from subsidy recipients, must decide the policy outcomes in advance. Since a subsidy system does exist, subsidies are generally based on standard procedures. In the “Outcome-based Subsidy Program”, however, there is a need to clearly stipulate what needs to be achieved through the subsidy and how, as well as to what degree. Furthermore, if those things are shared with the implementing bodies and the citizens serving as investors, it may lead to opportunities for the suitability of policies to be reviewed as a potential subsidised project.
In other words, social investments must be designed with a focus on bringing out the abilities of a diverse range of community leaders and community strengths, as well as building a community ecosystem in an effort to achieve sustainable local communities rather than simply injecting funds from the private sector and implementing programmes.
17.7 Preparations for Building an Ecosystem
One major development in Japan’s social sector in recent years is the establishment of the Dormant Deposit Utilisation Act. A dormant deposit refers to an account for a financial institution (such as a bank) for which there has been no financial activity for over 10 years. It is said that there are 80–100 billion yen worth of dormant deposits, annually, in Japan. Over the past 10 years, these funds have been included in financial institution profits. The system, which is based on systems used in the United Kingdom and Korea, is designed to fund non-profit organisations that aim to tackle social issues which the national government and local public entities are unable to address in light of expected rapid changes such as the decline and ageing of the population. The law went into effect in Japan in December 2016, and preparations are being made for its implementation in 2019. Specifically, the following activities are stipulated under the law: (1) activities related to the provision of support for children and youth, (2) activities related to the provision of support for persons who face difficulties with daily living and social living, (3) activities related to the provision of support for communities that are becoming less vibrant as well as those facing socially difficult times, and subsidies are to be provided for such activities. Roughly 50 billion yen is planned to be allocated annually, and there is currently a major debate over the types of projects these funds should be spent on as well as how the funds should be spent.
Furthermore, there is now a growing interest in Japan in bequest donations. Individual assets in Japan amount to over 1.8 quadrillion yen. It is said that those in their 60s account for 60% of that total. Donations, particularly bequest donations, were by no means common practice in Japan. However, the practice is now catching on in Japan, which was demonstrated when the Japan Legacy Gift Association came up with a bequest donations system. In fact, the number of bequest donations is increasing. In addition, training programmes for expert professionals who are able to provide consultations concerning bequest donations, such as tax attorneys and judicial scriveners, are being conducted throughout Japan.
How best to go about circulating funds such as dormant deposits and bequest donations in an effort to enhance community sustainability as well as how to facilitate utilisation in a way that will create an impact is a pressing challenge in this era of population decline. Regional financial institutions are being operated uniformly due to many years of financial administration regulations and have lost the insight and ability to determine the projects that communities need. A system for sustaining various communities cannot be revamped during the population decline phase—the time when such measures need to be taken—without adequate financial resources. To address this issue, Plus Social Investment was launched as a university venture based on research findings from the Research Centre for the Local Public Human Resources and Policy Development (LORC), Ryukoku University. It is Japan’s first finance house that specialises in social investments. It creates ties between corporate and individual investors with projects that enhance community sustainability (local ventures). The company sets up projects such as those for the development and supply of renewable energy, renovation of agricultural and public facilities, and local industry incubation. It will serve as the cornerstone of local financing through cooperation with existing financial institutions in the community and will engage in ongoing efforts to build an ecosystem.
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