The report compares lending environments across Europe over the period 2010- 2016.

The ALI uses information gathered from the European Central Bank and Eurostat, as well as the central banks of the countries outside the Euro area. The Index provides a scale from 0 to 10 and is higher for countries that have a higher credit gap, lower probability of getting a loan, or more stringent loan issuance criteria - in other words, where the alternative lending market can fill the current credit gap and other inefficiencies in the lending market.

Highlights
· Highest ranked countries for alternative lending in Europe are: Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland
· Countries with largest potential in terms of overall lending market size and alternative lending environment are: Poland, Greece and Ireland
· In 2010-2016 total density of credit institutions per 1 million inhabitants decreased from 19 to 15
· Aggregate European credit gap has increased from close to breakeven in 2010 to 12 percentage points of GDP
· Significant differences in availability of financing for household and corporate borrowers across countries:
· UK significantly higher for corporate borrowers than for households
· Credit gap for the UK and France is negative, indicating lending demand is met with a surplus
· Germany is lending market leader - total outstanding loans reach EUR 2.5 trillion, followed by France, where outstanding loans are EUR 2.1 trillion
· Ireland top country by number of credit institutions per 1 million inhabitants, followed by Austria and Finland

Currently the countries ranked as the most favourable for the expansion of alternative lending are Hungary, Slovenia, Latvia, Poland, Romania, Greece and Ireland whilst France, Germany, Netherlands, Austria, Finland and Sweden show highly efficient lending markets and therefore the lowest ALI.

In terms of market potential, taking into account the size of existing lending markets and the alternative lending environment, Poland, Greece and Ireland take the lead. The closest runner-up countries include Hungary, Slovenia, Latvia and Romania. Other countries with high potential are Italy, Spain and UK, which have medium ALI and high market size. 


Comparing the availability of financing for household and corporate borrowers some countries show significant differences between the two. Indices for Estonia, Hungary, Italy and Netherlands for corporate lending are at least 2 index points lower. On the other hand, in the UK the Index is significantly higher for corporate lending compared to households, indicating that alternative lending to households has less potential meaning that it’s easier for households to receive a loan.

The aggregate European credit gap has gradually increased to 12 percentage points from GDP between 2010-2016, from close to a breakeven in 2010. In nominal terms this credit gap reached EUR 410 billion at the end of the third quarter of 2016, indicating development opportunities for alternative lenders.

Jevgenijs Kazanins, P2P Platform Lead at TWINO, says:
“Alternative lending in Europe has demonstrated remarkable growth since the financial crisis, yet the ECB does not currently intend to closely monitor its development. In the absence of an official industry metric, our Alternative Lending Index (ALI) highlights the health and growth potential of this sector, which is fast-becoming a significant part of Europe’s lending landscape.

“As our report shows, the alternative lending industry is showing great potential for growth in many European countries. As it becomes more unified across Europe, the need for a supervising body and regulation will become more pressing.”

Julija Masane-Ose, Deal Advisory director at KPMG Baltics, says:
“TWINO Alternative Lending Index focuses on the lending environment in each respective country and does not take into consideration regulation, although, clearly, regulation directly impacts the development of the alternative lending market. As alternative lending industry will continue to grow we expect more proactive regulation both on a local level and European level, driven by alternative lenders and other participants of the market”.

“The index has not only identified countries with a high potential for the development of alternative lending, but has also indicated countries with an established, highly efficient lending market. In these countries, the existing sources of financing available to households and corporate borrowers are sufficient and the potential for the development of alternative lending is considered to be relatively low. The message for investors in these countries (with low ALI) is to look to other countries for investment opportunities.”