Asset Based Lending('ABL') in Japan : Transactions lending or relationship lending?

摘要

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 lenderu27s 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.