Singapore headquartered DBS Bank and Japan Finance Corporation (JFC), a financial institution (FI) wholly owned by the Japanese government that complements private FIs by providing policy-based financing, have signed a memorandum of understanding to support the Asian regionalisation of Japanese small and medium-sized enterprises (SMEs).

The first-of-its-kind partnership includes provision for JFC to support letters of credit (L/Cs) for SMEs within its overarching aim, which is to enable DBS to provide financing support for Japanese SMEs expanding into the key Asian markets of China, Hong Kong, India, Indonesia, Singapore and Taiwan.

Regional footprint

For the first time, Japan's SMEs will be able to access multiple markets through a single banking partner. Through this collaboration, these small firms will be able to tap into DBS' regional footprint and deep local expertise across the bank's six core markets in North Asia, South Asia and Southeast Asia.

They will also gain access to DBS' suite of innovative financial solutions, including digital cross-border payment capabilities and trade financing, as well as its ecosystem of professional services providers offering legal, accounting and human resource support.

JFC to extend L/Cs

To further facilitate the SMEs' penetration of new and wider Asian markets, JFC will extend standby L/Cs, which will enable the Japanese firms' local subsidiaries to secure long-term, local currency-denominated funding.

Under this programme, JFC's standby L/C acts as a guarantee, facilitating smooth access to funds through DBS.

Together, this partnership holds the potential to enhance business connectivity between Japan and the rest of Asia, fostering a stronger presence for Japanese SMEs across the region.

DBS and Japan

This partnership builds on DBS' longstanding commitment to Japan as an important market that dates back to 1977, when the bank established its Tokyo branch to offer a suite of financial products and services to corporate and institutional clients - marking the bank's first international foray into an overseas market.

In 2016, DBS Securities Japan was formed, expanding the bank's in-market offerings to include securities and enhancing its offerings to Japanese institutional clients.

While its new partnership with JFC underlines DBS' primary focus is on its six core Asian markets, the bank is expected to continue to serve Japanese institutional clients.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.