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European alternative finance markets surging

13 April 2015
by begbiestraynor -- last modified 13 April 2015

Markets for alternative finance are surging in scale right across Europe, according to the latest figures on the subject.


In fact, the industry taken as a whole across Europe is believed to have increased by some 144 per cent in scale over the course of 2014, with more and more businesses looking beyond traditional lenders for sources of finance.

The latest data on the progress of alternative finance markets throughout Europe has been compiled by the Judge Business School at University of Cambridge, with the help of the professional services firm Ernst & Young (E&Y). Their findings point to rapid growth in a market considered only a niche concern as recently as five years ago.

Prominent among the new forms of finance gaining in popularity are equity-based services such as crowdfunding and other online peer-to-peer lending scenarios. Key to the progress of these solutions has been the creation of internet-based platforms that allows investors and businesses to connect and agree terms of bespoke investment and lending deals.

According to figures from the Judge Business School, the European alternative finance market was worth just short of €3 billion over the course of last year and could be worth in excess of €7 billion in 2015.

“These new forms of alternative finance are growing quickly, and this growth is beginning to attract institutional investors,” commented Robert Wardrop, executive director of the Centre for Excellence for Alternative Finance at the Judge School in Cambridge.

“Alternative finance, at least in some European countries, is on the cusp of becoming mainstream.”

“For me some of the most interesting metrics are the rate of adoption in certain markets and models,” added Andy Baldwin, a managing partner with E&Y.

“For example peer-to-peer business lending grew at more than 270 per cent in mainland Europe this year, and Estonia and Sweden have some of the highest volumes per capita. The whole financial services industry should be watching this space with growing interest and this study will provide a valuable benchmark against which to measure future developments.”

The bulk of the progress being made by the alternative finance sector across Europe is being driven by demand among small and medium-sized enterprises (SMEs) and start-ups, the latest figures indicate. The growth in demand within these sectors of economies across the continent is assumed to be largely the result of a widespread reluctance among major banking institutions to lend money to companies looking to fund early-stage development.

Over the past three years there has been an average growth rate of 133 per cent in the amount of money being borrowed online from alternative sources by start-ups and SMEs around Europe. The market as a whole has been growing steadily over that same period at a rate of close to 75 per cent.

As it stands, the UK has comfortably the largest market for alternative finance in Europe, with British businesses gaining access to around €2.34 billion through alternative avenues over the course of 2014. France is ranked second and Germany third in this context with the two countries having alternative finance markets worth €154 million and €140 million respectively.

Following the UK, France and Germany in terms of the scale of their alternative finance markets in 2014 were Sweden, the Netherlands and Spain.

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