The growing popularity of peer-to-peer lending and crowdfunding could take the European market for online alternative finance to €7 billion this year, building on the 144 per cent growth in 2014 that saw the sector reach €3 billion.
A new report published on Monday by the University of Cambridge Judge Business School and professional services firm EY explored the growth in the market following a drop in traditional lending in the wake of the financial crisis.
The UK dominates the European market for alternative finance, the report found, reaching €2.34bn in 2014. France follows with a more conservative €154m in 2014, with Germany reaching €140m, Sweden €107m, and the Netherlands €78m.
Smaller businesses across Europe have found it increasingly difficult to access funding from traditional channels, making peer-to-peer lending the largest market segment in Europe. Excluding the UK, peer-to-peer lending in Europe reached €274.62m in 2014. Reward-based crowdfunding recorded €120.33m, followed by peer-to-peer business lending (€93.1m) and equity-based crowdfunding (€82.56m).
Collectively, the European alternative finance market, excluding the UK, is estimated to have provided €385m worth of early-stage, growth and working capital financing to nearly 10,000 European start-ups and SMEs during the last three years, of which €201.43m was funded in 2014 alone.
The report shows that the ability of alternative finance to fill the gaps left by traditional lenders has been recognised, with peer-to-peer business lending growing by a massive 272 per cent between 2012 and 2014. Reward-based crowdfunding grew by 127 per cent, equity-based crowdfunding grew by 116 per cent and peer-to-peer consumer lending grew by 113 per cent in the same period.
Based on the average growth rates between 2012 and 2014, excluding the UK, the European online alternative finance market is likely to exceed €1,300m in 2015.
Put the UK back into the equation, and the overall European alternative industry is on track to grow beyond €7 billion in 2015, “if the market fundamentals remain sound and growth continues apace”, the report concluded.
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