In-house and Outsourced Funding

Raising the concept of "in-house vs. outsourced funding"
When considering fundraising, we sometimes use the terms internal funds and external funds. Internal funds mainly refer to retained earnings (internal reserves), while external funds refer to the acquisition of funds from outside the company, such as borrowing, issuing corporate bonds, and capital increases (issuing shares). In this classification, the issue of inter-company credit is categorized as an issue of external funding.
However, I believe that it is possible to classify corporate money into in-house and outsourced, just as we do when manufacturing products. Here, in-house refers to various methods of generating funds through internal judgment and decision-making, and by using this, companies can proceed with management decisions without depending on the outside.
Through such judgments, companies on one hand create a need for funds (e.g., decisions on capital investment), conversely suspend the need for funds (deferral/suspension of investment decisions), and furthermore generate funds (reduction of expenses, sale of assets).

CMS as an in-house means
For example, lowering production costs and reducing operating expenses are acts that generate funds accordingly. The shortening of the CCC, which we have already seen, is the same. Cash Management Systems (CMS) and asset securitization are attracting attention as means of such in-house funding.
Let's look at CMS. This is for companies with group companies to perform fund pooling within the group, strive for efficient use of funds within the group, and compress fees and indirect expenses through netting (processing inter-company payments within the group by adjusting balance transfers) and acting as a payment agent for payments outside the group. For large companies, this is a function of their finance department or financial subsidiary, but for banks, it is also a product to sell to companies by developing it as a service provided by the bank. It seems contradictory for a bank to sell this service, which also saves on interest and fees, but it is thought that by selling this service, the bank is encouraging the centralization and consolidation of transactions with the company to their own bank.
It is assumed that the efficient use of held assets will reduce the need to bring in funds and lead to a reduction in interest and fees paid to the outside.
Mitsubishi Bank's Fund and Financial Efficiency Service CMS Reading the explanation, it states that it provides an integrated financial management system that includes accounts at other banks. It presents a form of providing a system that oversees the whole, including accounts at other banks. This is in line with the reality of large companies that trade with multiple banks.
Sumitomo Mitsui Banking Corporation's CMS Proposed to corporate groups with consolidated subsidiaries as a method for centralized management and efficiency of funds within the group. Functions include pooling, cash flow management, loan and deposit management, and payment agency. As introduction effects, it cites the centralization of financial settlement operations, effective use of funds, unification of accounting operations, and consolidation of indirect operations.
Resona CMS Service Divided into items for fund pooling, payment agency (payment agency and netting of intra-group payments), and time-based lending and borrowing.
We have been repeating the discussion of CMS since the 1990s. Therefore, it may be that it is natural for large companies to have introduced it now, and we are at a stage where improvement in its efficiency is required.Survey conducted by ABeam Consulting in 2007 In the survey, a full 80% of the 283 companies listed on the First Section of the Tokyo Stock Exchange that responded answered that they had already introduced it. Incidentally, in a survey conducted by another organization in 2003, 43% had introduced it.
From the response results, while satisfaction with the efficiency of fund consolidation and savings in fundraising costs is high, satisfaction with risk control and rationalization of administrative processing is slightly low, and it can be seen that there are many cases where the expected benefits of CMS are not demonstrated because multiple bank CMS services are used for various reasons or the cooperation of subsidiaries is insufficient, hindering the concentration of funds.
What are the issues with CMS at the current stage? Kyriba is a company that provides financial services through the cloud.Reading the company's explanation of CMS (it seems to have been produced in 2014 based on the content), it points out that the visualization of account balances and deposits/withdrawals has become a new point of CMS. Another point is to further reduce the costs associated with remittance settlement, etc.
A technology called web scraping is said to be useful for this visualization.Regarding settlement, it is argued that if a block chain system is used for the transfer of "value," speed can be increased and costs can be significantly reduced in other words, the possibility of a major transformation is increasing by using new technologies in the cloud (net).
For small and medium-sized enterprises with a limited number of subsidiaries, is a large-scale system like CMS over-spec (excessive investment)? This question is also being whispered. The following Skelton, a company (Development Bank of Japan G), claims that the introduction of software called skelton CMT can sufficiently meet the needs of small and medium-sized enterprises (
Cash Management Tool (skelton CMT overview)).

Asset securitization as an in-house means Another method of in-house production is to liquefy assets, to generate funds in-house by turning assets into cash quickly, and to lead to savings on money borrowed from the outside.
Asset securitization is one of the fundraising methods based on assets. Asset-based borrowing or lending is also conceivable. Asset-backed securities are issued.
This method has various differences from sales and leaseback, which is a method of asset liquidation that has existed for a long time. In sales and leaseback, assets are sold in form to family or related companies (the sale is a pretense, and they are thinking of buying them back if the situation improves), and after the sale, rent is paid to this family or related company. In asset securitization, first, the source of funds is a third-party investor. And the sale of assets is truly sold to a special purpose company, etc. (true sale).
In order for third-party investors to be convinced and buy as an investment, various securitization techniques are applied to these securities. There are the following:
A spread account that designs the revenue paid from the securities to be smaller than the revenue paid to the securities. Over-collateralization that designs the amount of securities issued to be smaller than the assets in question. And layering that applies a senior subordinated structure to the issued securities. Through the full use of such techniques, financial products suitable for investors seeking high credit ratings were created.

Securitization of small-lot receivables and securitization of business
The objects to be securitized started with things that made small-lot receivables into collective receivables, and things that made large-lot receivables into small lots, but eventually this technology came to be used for the procurement of business funds to be carried out from now on. This is called whole business securitization. It can be said that so-called project finance is basically the same as this business securitization.
Business Securitization Japan Credit Rating Agency JCR 2012/06/01
Securitization was very powerful for a time as a new financial method, but in 2007-2008, problems with subprime loans in housing loan securitization in the United States surfaced, and it contracted all at once. Since then, as monetary easing has progressed, it is difficult to seek the former momentum in securitization, which is costly to compose. However, as a financial method, this method of liquefying assets is gaining a certain scale in the market.
Securitization market balance survey (as of the end of March 2019) Published on May 31, 2019 According to this, as monetary easing progresses, the balance of RMBS (liquidation of housing loan receivables, apartment loan receivables, etc.) and shopping credit receivables is increasing every year. As of the end of March 2019, the balance found in this survey is 20.2246 trillion yen, an increase of 5.7% from the same period of the previous year, and the weight of RMBS is 87.7%. What is found in this statistic is something that has made small-lot receivables into collective receivables. Unfortunately, figures for fiscal year 2018 and beyond have not been published.
What is found in this balance survey is the numerical value of the liquidation of the aforementioned small-lot receivables into collective receivables, and the business securitization discussed earlier is not included.
I think there is also a difference in the motivation to promote business securitization and the liquidation of small-lot receivables.

Off-balance sheet as a motive for promoting business securitization
Regarding business securitization, there are real estate companies that seek to expand their business while avoiding the expansion of their balance sheets (or distancing themselves from the risks of real estate investment). There is also the need for developing various social infrastructures such as power and railways. Alternatively, there is the intention of governments and others to expand public works by mobilizing private funds. In a word, I think the motive lies in off-balance sheet treatment. As a result, it has become quite common for business entities to be organized for each project and for the financing of those projects to be carried out accordingly.
Project finance methods (PFI information)
Due to off-balance sheet treatment: 1) Risks from the business do not recourse to the sponsor, which is the parent company. 2) Financing is carried out by a special purpose company, which is the business entity, and it is not affected by, nor does it affect, the finances of the parent company, etc.
Fact-finding survey on real estate securitization, Ministry of Land, Infrastructure, Transport and Tourism, up to fiscal year 2017 Fiscal years 2014-2017: Over 1,000 cases and around 5 trillion yen in securitization can be confirmed each year.
Merits of real estate securitization, Urban Management Strategy Institute Real estate being moved off-balance sheet (likely created around 2004-2008)
Real estate liquidation, Corporate Accounting Navi 2017/03/10 Improvement in financial standing due to off-balance sheet treatment is pointed out. This happens because the real estate is separated (the scale of assets becomes smaller), and because the business entity itself carries out the financing, reducing the financial burden on the parent company, etc.
Real estate securitization, development-type securitization (FUJITA) As for the usage of the term, it is pointed out that development-type securitization refers to things created from the planning stage.
A study on project finance, Analysis Vol. 52 No. 5/6 2018/09
Project finance continues to increase, Shin-Denryoku Net 2018/09/25
Mitsubishi UFJ Bank, Project Finance
ORIX, Proposal for improving financial standing through project finance
Case study Establishment of renewable energy fund, 2019/02/14
Sumitomo Corporation - Sumitomo Mitsui Banking Corporation - Development Bank of Japan
Understanding PFI in 5 minutes (document created in 2011)
Current status of PFI, Cabinet Office This project, which began in 1999, has reached a cumulative total of 740 cases by the end of March 2019, with a contract value of 6.2361 trillion yen. PFI is intended to promote public works by using private-sector know-how and money, and I consider it a part of project finance.