The Danish Crowdfunding Association welcomes the opportunity to provide comments to the mid-term review of the Capital Markets Union.
The Danish Crowdfunding Association is a strong supporter of the Capital Markets Union and welcomes the initiatives taken by the Commission so far. The European SME funding market is however still very dependent on banks and there is a large unexploited potential for alternative finance, especially for, but not limited to, SMEs and start-up companies.
Section 1 of the consultation document is the most relevant part for the Danish Crowdfunding Association and our comments will therefore focus on this section.
As the Commission rightly points out, information barriers between SMEs and alternative financing providers are significant. The barriers are two-fold as the SMEs are often unaware of the alternative opportunities, and as the alternative financial providers lack information about the SMEs.
The Danish Crowdfunding Association welcome the Commissions initiative to share best practices and map the developments of crowdfunding in the EU member states. We share the perspective that it is too early to regulate the area at EU level, but would however encourage the Commission to issue guidelines encouraging member states to establish voluntary referral schemes. In the UK a similar, but obligatory scheme is established. The Danish Crowdfunding Association find the regulatory model too strict and inflexible for the different situations in the EU member states, and would therefore recommend a model, where banks on a voluntary basis can refer rejected SMEs to a web based platform.
This model has several advantages
- The information barrier to SMEs will be decreased significantly and the eligible companies will be able to finance their growth through other means than bank finance.
- Diversification in the EU capital market
- The banks will be able to enhance their advice by combining a loan rejection with a reference to alternative options.
- A voluntary model is flexible and easy to implement
- The quality of the alternative providers is ensured by only including in the platform providers registered by the national financial authority.
- The banks will avoid further regulation.
The Danish Crowdfunding Association have experienced, that companies who use alternative financing become customers in the banks when they are more mature companies. Banks should therefore also have a long-term interest in providing the SMEs and start-ups with a constructive advice through referral. The Danish Crowdfunding Association are at your disposal for further elaboration of the proposal.
Sigurd Schou Madsen
Member of the board