Gojo brings microfinance to the masses.
Founder Taejun Shin tells Praveen Kumar, manager of Baillie Gifford Shin Nippon, of plans to help the world’s poorest people by creating a private sector version of the World Bank.
Taejun Shin at a kick-boxing gym in Myanmar
Illustrations by Hiroyuki Izutsu
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This article originally featured in Baillie Gifford’s Autumn 2021 issue of Trust magazine.
By the year 2030, Gojo’s ambition is to offer microfinance – affordable small personal and business loans – to more than 100 million people in over 50 countries. It’s an ambitious goal given that currently it serves 733,000 customers in four countries: India, Sri Lanka, Cambodia and Myanmar.
Gojo (Gojo & Company, Inc), which was founded in 2014, is structured as a holding company of seven subsidiary and affiliated financial service providers. Its customers, the vast majority of them women, include some of the world’s poorest people. Often, they have no other access to reliable credit facilities that could transform their lives for the better.
Founder Taejun Shin is himself an outsider, proud of his Korean-Japanese heritage. A modern-day renaissance man, he is the author of nine books on finance, child welfare and innovation. He’s also a kick boxer, a karate black belt, an ultra-marathon runner and a ‘6 dan’ advanced player of the ancient strategy game of Go. Here he shares his vision with Praveen Kumar, manager of Baillie Gifford Shin Nippon and deputy manager of The Baillie Gifford Japan Trust.
Praveen Kumar: Tell me a bit about your own background, Taejun.
Taejun Shin: I was born and raised in Japan, the grandchild of Korean immigrants. My grandparents came to Japan before the end of the second world war. They were technically stateless, a status I have inherited, so I have refugee papers rather than a passport. I get suspicious looks at border checks, like Tom Hanks in the film The Terminal. Even having been a Young Global Leader of the World Economic Forum, my statelessness reminds me that I’m from the ‘have-not’ side.
PK: How did you get interested in microfinance?
TS: At college, I wanted to be a human rights lawyer and interned at an international non-governmental organisation. I learned that fundraising was always the big bottleneck. I thought I should learn the rules of capitalism. I joined Morgan Stanley and then Unison Capital, at the time the largest private equity fund in Japan. I encountered microfinance and launched the first microfinance investment fund in Japan while working in the private equity industry. We invested in four microfinance companies and they turned out to be quite successful. I thought, maybe I can do this as a full-time job, so I started Gojo.
PK: What tells you whether a market is a good or bad one to enter?
TS: We always look carefully at political risk. One reason we chose Cambodia and Sri Lanka is that the memory of civil war tends to make people value peace. The stability of the currency is also important. For example, Cambodia mainly uses the US dollar, which is a big reassurance to us. The final thing is market competition. If it’s too competitive, it’s not easy to enter.
PK: How do you see the growth opportunity for Gojo in these different markets?
TS: India is the biggest potential source of growth for us.
Only 30 per cent of people have access to useful and affordable financial services, so there’s huge demand. Our group company Satya MicroCapital, which provides collateral-free credit to people at the bottom of the social pyramid, has taken on 500,000 new customers in just four years, and our Indian business grows by 100 per cent plus every year. In a few years, we should be the biggest microfinance provider in India, and therefore in the world.
PK: How do you decide to invest in a partner company?
TS: Two things basically. One is people, and the other is the business model. The people factor is much more important. I look for alignment in principles and philosophies. I have my secret set of 70 questions to assess our potential partners. I start with this one: Let’s say you were on the cover page of a magazine. What’s the headline and what’s the first paragraph? Also, I want to know whether this management team can manage breakneck growth.
The second thing is the business model. I always look at whether the branches that are older than three or four years are making a profit. If their profit looks healthy, I don’t need to worry too much.
Our Indian business grows by 100 per cent plus every year
PK: The businesses you buy a stake in already have decent market positions. What does Gojo bring to the table?
TS: Often the management teams can run the operation perfectly well, so we don’t need to do anything, but sometimes we can apply extra operational know-how. The second thing is technology. Gojo’s engineering team can seamlessly collaborate with group companies to integrate their IT systems into our core banking system. Then there’s investor relations. Our team members have backgrounds in the investment banking or asset management sectors, speak the language of finance people and can help partners raise funds from Japanese and European investors.
Finally, there’s governance. Standards vary a lot. We have our own set of clear policies with which our partner companies comply. Sophisticated investors don’t want to invest in companies with bad governance.
PK: What are your long-term plans for expansion?
TS: Africa is the next big destination for us. Our managing partner Arnaud Ventura, who founded and led the foremost financial inclusion group in Africa, is leading our initial entry into Africa and setting up a holding company this year.
In terms of capital allocation, India will continue to make up the biggest share at above 60 per cent. But there are many other countries we should look at, such as Indonesia and the Philippines.
PK: What’s your long-term vision for Gojo?
TS: To build the private sector version of the World Bank, providing financial services for low-income households in every developing nation. I first had the idea in 2012 when I went to a World Economic Forum conference, which is a kind of private sector United Nations. I felt, “If the World Economic Forum can do this, maybe I can do this.” I know that serving more than 100 million people in 50 countries will not be an easy task, but I want to share that long-term vision. After that, who knows?
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