Twino in co-operation with KPMG have lauched the first Aleternative Loan Index (ALI) of Europe, offering an overview of the potiential of the financial industry. Latvia has been awarded the 3rd place in the ALI, behind Hungary and Slovenia.
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.
The graphic demonstrates the efficiency of local lending markets - the lower the efficiency, the higher the potential for alternative lending services. 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 market 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.
The advisory director of KPMG Baltics, Julija Masane-Ose comments the ALI:
“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.”
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.
This is the first index of its kind, which largely is a reflection of the lack of regulation or attention from formal governing bodies to this relatively new branch of the financial industry. TWINO platform lead, Jevgenijs Kazanins says:
"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.”
TWINO is the fastest-growing peer-to-peer lending marketplace in Europe. It offers investors the chance to earn premium returns from unsecured consumer loans across Georgia, Latvia, Denmark and Poland.
Since it was established in 2009, TWINO has originated over €420m of lending. The company launched its marketplace investment platform in 2015 and has since attracted over 5,500 investors from more than 30 countries, in particular from the Baltic countries, Germany, and Great Britain.