In the U.S., donations to NPOs total 18.2433 trillion yen, while in Japan they stand at just 693.1 billion yen. This difference is also seen in per-person donations, with Americans donating 130,000 yen per year and Japanese donating 2,500 yen per year (2013 White Paper on Donations). Furthermore, in the U.S., NPOs provide 10% of all jobs, employing 12 million people. In Japan, which is saddled with a huge fiscal deficit, the scope of activity of NPOs will need to be expanded in the future. Action to nurture NPOs that can stand shoulder to shoulder with their U.S. counterparts is essential.
1. Harmonize the legal framework for corporations engaging in not-for-profit activities and introduce a simple, easy-to-understand name for them: social contribution corporation (new NPO)
Japan’s rules concerning nonprofit corporations are incredibly difficult to understand. In Japan, most schools are run by school corporations, hospitals are operated by healthcare corporations, and religions are administered by religious corporations. There are also many types of corporations that engage in not-for-profit activities. In addition to NPOs, there are social welfare corporations, incorporated bodies, incorporated foundations, and so on. It would therefore be logical to harmonize the rules concerning corporations that engage in not-for-profit activities to make them simpler and easier to understand. Specifically, a new, single name should be introduced: social contribution corporation (new NPO).
2. Make NPOs bigger and nurture social entrepreneurs
The U.S. is an NPO giant, and many NPOs there are enormous. The top 15 organizations have revenues in excess of one billion dollars. Japan’s NPOs, on the other hand, tend to be small. Just 130 NPOs have revenues of 100 million yen or more. A lot of them are like volunteer groups: teams of several people on low salaries working together on projects. NPOs need to be made larger by forming groups, forging alliances, merging with each other, and so on. At the same time, steps need to be taken to ensure that NPOs can continuously secure revenue and increase their personnel costs. Managerial personnel for NPOs need to be trained and NPOs need to adopt clear business models for expanding their revenues.
In the West, NPOs garner the respect of the public, and high-caliber personnel go to work for them. In Japan, however, it is said that the biggest challenge for NPOs is to secure human resources. In Japan, too, people need to be proactively trained in management methods to nurture managers for NPOs. If managers cannot be trained in-house in time, it would be effective to get corporate executives involved in NPO management or to hire retirees from the business world as managers.
3. Ensure thorough disclosure to enhance trust in NPOs. Establish an environment for fundraising
The biggest reason that NPOs in Japan have trouble attracting donations is a lack of trust in them. There’s a vicious cycle, with hardly any rules governing disclosures by NPOs, and if you do make a donation, you don’t know how the money is going to be used, so you don’t develop feelings of peace of mind, trust, and satisfaction. It is vital to establish rules for adequate disclosure, as NPOs should report how they have used donations and properly express their gratitude to donators. In addition, to expand methods of gathering donations, it will probably also be necessary to instill a culture of making donations in Japan by (1) utilizing the NPO donation tax system, which is far more extensive than other such systems around the world, (2) utilizing crowdfunding, and (3) permitting digital receipts and making donations tax deductible at the time of the end-of-year tax adjustment, not just when the tax return for the year is filed.
4. Utilize dormant accounts and the power of the private sector to resolve social issues
The total value of dormant accounts at banks is increasing by approximately 80 billion yen each year. Dormant accounts are ones that have seen no withdrawals or deposits for many years, and where contact with the accountholder cannot be made. In other countries, the money in dormant accounts is often used for social work and welfare work. It would be good if ambitious and trusted social entrepreneurs, NPOs, etc. could use this new source of funds, which differs from the subsidies that are provided from taxes, to benefit society.