Alternative Financing is an important source of financing for entrepreneurs, startups and SMEs. However, there is huge gap between Southern, Central and Easter Europe that are lagging behind Northern and Western Europe in terms of alternative financing volumes (total and per capita) and versatility of funding sources. To bridge this gap, Altfinator will facilitate the transfer of best practices from more advanced to less advanced markets. Altfinator project will design, develop and implement a capacity-building strategy for the financial ecosystem and its participants to improve the provision and absorption of alternative financing.
The Alternative financing ecosystems report is a product of the mapping and analysis exercise that was conducted for the purposes of the Altfinator project. The goals of the report were to:

  • Provide an overview of the multitude of market actors and other stakeholders that the project can target and engage in its activities.
  • Determine the needs of these ecosystems and identify the main areas where Altfinator can make the greatest impact.
  • Overall, the analysis confirmed the hypothesis that Altfinator target regions are significantly lagging behind their Western counterparts. The Top 3 performers in Europe by alternative financing market volume are UK, France and Germany, while the top 3 by volume per capita are UK, Estonia and Monaco. Remarkably, the total market volume of Spain, which is the top performer within the Altfinator regions, is three times smaller than that of Germany. Moreover, the total market volume of the Central-Eastern European countries (Latvia, Lithuania, Poland, Hungary, Slovakia, Czech Republic) amounts to 132 million euros, equivalent to the Spanish market volume. These findings demonstrate the vast differences between the countries as well as reinforce the need for targeted actions.

The report’s main value lies in the detailed country profiles created for each target country. The profiles are largely based on anonymized and collated interview data, collected in 2018. Based on the country profiles we were able to consolidate the challenges in to key clusters of:

  • Regulation and role of government
  • Lack of knowledge, awareness and education
  • Risk aversion and lack of trust

Regardless of having generally similar challenges, the analysis also revealed that there is no “one size fits all” solution for the target countries, all of which have individual shortcomings in the field of alternative financing. The report also reveals unique opportunities in each of the countries.
Here are some other interesting findings from the report:

  • Traditional alternative financing instruments (VC, BA funding etc.) are far more common than online platform-based financing
  • Balance sheet business lending, profit sharing crowdfunding, and debt crowdfunding have extremely limited availability in the region
  • The most common type of online alternative financing is reward crowdfunding followed by equity-based crowdfunding and invoice trading

This report and the accompanying data serve as significant input for developing the Altfinator capacity-building strategy and the accompanying materials and tools. This will help to connect AF providers and innovative SMEs in Europe. The overall objective of Altfinator project is to help to create a developed alternative financing market in target regions and this report has been the first step in that process.

Download the entire report here