Promoting Regional Industries Beyond Financial Frameworks. The Future Kyushu Mirai Creation is Building for the Region (Part 1)

In April 2023, Kyushu Financial Group Co., Ltd., which holds Higo Bank Co., Ltd. and Kagoshima Bank Co., Ltd. under its umbrella, established Kyushu Mirai Creation Co., Ltd. as a subsidiary. Currently, the company operates overseas business support services promoting agricultural, forestry, and fishery products from the three southern Kyushu prefectures (Kumamoto, Kagoshima, Miyazaki) to international markets, and an e-commerce mall business connecting local businesses with consumers.

Why did Kyushu Financial Group, which includes leading regional banks, venture into non-financial fields? In this article, we hear from Mr. Taizo Hagiwara, President and CEO of Kyushu Mirai Creation, and Mr. Masataka Sugimoto and Mr. Takuya Kagata of Dentsu Consulting Inc., who provided ongoing support leading up to the company's establishment. They discuss the background of the establishment, challenges facing regional industries, and future prospects.In Part 1, they discuss the business environment surrounding regional banks and the intent behind establishing Kyushu Mirai Creation.

Regional Banks Need Regional Trading Company Functions to Unify Their Areas

Kagata: First, regarding the background to establishing Kyushu Mirai Creation, could you explain the situation surrounding regional banks and the challenges facing local industries?

Hagiwara: Kyushu Financial Group, the parent entity of Kyushu Mirai Creation, was established in 2015 as a financial holding company through the merger of Kagoshima Bank and Higo Bank. Both banks are leading regional banks with over 100 years of history, having contributed to local industries alongside their customers. However, in recent years, population decline has accelerated, and the regional economy is shrinking.For about the past decade, we've been consulted by the Financial Services Agency regarding our strategy for the next ten years. Both banks have also been sowing various seeds to revitalize the region, going beyond the traditional role of a bank.

Amidst this, the discussion evolved to the idea that "banks need a regional trading company function to unite the region." Going forward, the region itself needs to become a single conglomerate. While developing this vision, coupled with deregulation in the financial industry, we decided to establish Kyushu Mirai Creation as a regional trading company.

The Kyushu Financial Group has been advancing its third mid-term management plan, "Reform," since April 2021. One of the pillars of this strategy is strengthening and creating regional trading company functions. Kyushu Mirai Creation represents the first major step toward realizing this goal.

Kagata: So the founding intent is to promote regional industries alongside local companies.

Hagiwara: That's correct. Our purpose is "Creating Regions, Pioneering Futures." We will build the region together with our local customers. Moreover, we won't just provide indirect support; we will take the lead in opening up the future. We established the company with that determination.

Kagata: What kind of business model is Kyushu Mirai Creation aiming for?

Hagiwara: Our goal is to create a business model that benefits all parties: the region, local businesses, individual local consumers, and Kyushu Mirai Creation itself. We want to advance our business with the region's sustainability in mind, not just our own self-interest.

By strengthening horizontal collaboration among Kumamoto, Kagoshima, and Miyazaki Prefectures, we can create synergies as if we were a unified entity like "Minami Kyushu Corporation." While local government-led initiatives might sometimes face obstacles, if we take the lead, we can achieve things like "joint overseas expansion by the three prefectures."

Kagata: Within the Kyushu Financial Group, what is the positioning of the new company, Kyushu Mirai Creation?

Hagiwara: The core of the Kyushu Financial Group consists of financial divisions like Higo Bank and Kagoshima Bank. Kyushu Mirai Creation is not a financial company; it will be the central entity in the non-financial sector.

Kagata: So for Kyushu Financial Group, Kyushu Mirai Creation represents an ambitious venture into new territory. Mr. Sugimoto from Dentsu Consulting Inc., who has been involved from the start, what are your thoughts?

Sugimoto: Kyushu Financial Group primarily operates in the three southern Kyushu prefectures.Being from Miyazaki Prefecture, I felt a natural affinity for the Kyushu Financial Group, a leading local enterprise. Moreover, President Hagiwara has a strong desire to further invigorate Southern Kyushu. He aims to consolidate previously fragmented regional operations, connect information, and drive sales. I resonated with this historic regional bank's drive to foster innovation through new ventures, which is why Dentsu Consulting Inc. accompanied them from the very beginning of their purpose-setting phase.

Overseas Business Support Services: Connecting Global Needs to Local Communities

Kagata: Kyushu Mirai Creation currently operates an overseas business support service and an e-commerce mall business. First, please tell us more about the overseas business support service.

Hagiwara: First, I want to emphasize that we don't intend to limit ourselves to just these two businesses. Beyond these, we aim to undertake any ventures that contribute to solving regional challenges and leverage our capabilities in non-financial sectors for the benefit of the community.

Regarding overseas business support, Kagoshima Bank and Higo Bank had already been involved. Kagoshima Bank has offices in Shanghai and Taipei, while Higo Bank has offices in Hong Kong, Shanghai, and Taipei. However, these bank overseas offices could not engage in sales activities; they could only provide support as part of their services, which had limitations.

Meanwhile, Southern Kyushu is a major producer of agricultural and marine products. Historically, these goods were shipped to Tokyo, a major consumer market. However, shipping to Taiwan or Hong Kong is actually nearly the same distance. We believe Southern Kyushu's agricultural and marine products are comparable in production volume and quality to those from Hokkaido, which has global brand recognition. Leveraging our geographical advantage should create business opportunities. Furthermore, the Ministry of Agriculture, Forestry and Fisheries' Export Expansion Strategy provides a tailwind.

Against this backdrop, our goal is to thoroughly understand local needs and connect them to businesses in Southern Kyushu through a market-in approach. For example, we collaborate with banks to connect companies by saying, "Hong Kong currently demands this type of product. Would you like to bring your products there?" The production base already exists as a major production area. We hope to expand overseas sales channels and contribute to boosting the region's GDP.

Kagata: So, Kyushu Mirai Creation is taking the overseas support for South Kyushu businesses that banks have provided and strengthening it as a business, offering sales support to contribute to the regional economy. I imagine this is still in its early stages, but what kinds of products have high local demand?

Hagiwara: Agricultural and marine products definitely have high demand. Geographically, Hong Kong and Taiwan are natural fits since banks have offices there. Going forward, we want to expand business opportunities to countries with high economic growth rates and strong momentum.

However, we remain fundamentally a regional trading company and have no intention of becoming like a major trading house. We aim to handle small-lot, diverse products that major trading houses might avoid, providing support that addresses those hard-to-reach needs. We want to work alongside our clients, rolling up our sleeves to support their overseas business ventures.

Kyushu Mirai Creation was established to solve challenges faced by local businesses and promote regional industries. Its aim is not solely to pursue its own profit. It has come to understand that its role as a regional trading company is to unite businesses in Southern Kyushu to create the region's future. In the second part, we will hear about its other pillar: the EC mall business.