Alternative Finance Still at a Standstill, According to the Latest Research by the School of Management of Polimi

The increase in interest rates and geopolitical uncertainties in the 12 months from June 2023 to June 2024 continued to slow down the alternative finance market, which was much less competitive in the eyes of investors and, at the same time, found it difficult to attract issuers on both the debt and equity fronts: the minibond, crowdfunding, invoice trading, direct lending, tokenization and crypto-asset, private equity and venture capital, IPO markets all showed a slight decline in 2023 and the first months of 2024.

This is clear from the data published in the seventh edition of the Research Notebook on Alternative Finance for SMEs in Italy, edited by Prof. Giancarlo Giudici, full professor at the School of Management of the Milan Polytechnic and Scientific Director of the Crowdinvesting Observatory.

The notebook was presented in Milan on the occasion of Alt-Finance Day – The Day of Alternative Finance, organized by Innexta – Consortium for Credit and Finance , in collaboration with Unioncamere , the Milan Monza Brianza Lodi Chamber of Commerce and the School of Management of the Milan Polytechnic.

Alternative finance market in Italy slowed down

In detail, the placement of minibonds in the last 12 months covered by the research was 609 million, of which 407 million in the second half of 2023 and only 202 million in the first half of 2024 (-33% compared to the same period in 2023). The annual coupon (calculated only on fixed-rate securities) has continued to rise in recent months, following the alternative finance market dynamics: in the first half of 2024 we have an average of 9.82% (in 2021 the value was 3.97%).

An increase in the variable coupon is noted; in 2021 only 7.0% of issues included it, while the share rose to 52.8% in 2023 and 61.4% in the first six months of 2024. For the most recent years, since before 2022 only a small minority of minibonds did not have a fixed coupon, the report also calculated the average rate of minibonds with variable coupons, calculated by adding the requested spread to the Eurirs (Euro interest rate swap) rate corresponding to the Euribor, at the maturity date that coincides with the maturity of the security: the value found is decidedly lower than the fixed rate: in the first six months of 2024 we are at 5.88%.

The average maturity has remained fairly constant over 5 years and the repayment plan chosen is increasingly the amortizing one: bullet securities are in fact a minority (31.8% in the first half of 2024). Finally, the use of a real guarantee, provided either by the issuer itself or by external entities such as the Guarantee Fund, SACE and the Confidi, continues to grow; this is a legacy of the emergency measures linked to the Covid pandemic, demonstrating that the alternative finance market has become accustomed to guarantees and therefore expects to have them available.

As for equity and lending crowdfunding, in Italy (as of November 15, 2024) there are 40 platforms authorized to operate under the new European ECSP regulation

The net balance of the last 12 months is largely negative: considering the new platforms that have arrived on the market, compared to last year’s mapping, when the EU regulation had not yet come into force, there are in fact 39 platforms missing (25 equity and 14 lending) that either have not deemed it appropriate to request authorization under the new Regulation or may still be in the authorization request phase, but in any case are not currently active. In the first half of 2024, the authorized platforms raised 48 million euros (-17%) on equity and 88 million euros (-3%) on lending respectively.

Although the data are not positive, the research notes that there are all the conditions to affirm that the development of alternative (or complementary) finance to bank credit in Italy is continuing to generate tangible advantages and that, thanks to the hoped-for reduction in interest rates, 2025 could mark a turning point.

Professor Giancarlo Giudici of the Politecnico di Milano, author of the research, commented: “I believe that there are two transversal elements to underline, on the one hand, a series of legislative and regulatory innovations have arrived that have ‘raised the bar’ in the segments most exposed to the risks of opportunistic behavior such as crowdfunding and crypto-assets; on the other, we are moving towards simplification in the more traditional ones such as listing on the stock exchange. Technological evolution and fintech are, certainly, creating more and more opportunities for SMEs that want to raise capital. However, more players are needed in the supply chain, who can stimulate both the demand for capital from entrepreneurs and the supply from investors.”

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First published in Be Beez. A third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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