LIQUIDITY & FUNDRAISING: CROWDFUNDING Virtuous circle: Lithuania already has a well-developed peer-to-business lending regime
That’s what Lithuania, which has created an enabling environment for peer-to-business lending, aspires to be – and Jovita Aleksiūnė from the Bank of Lithuania, Vytautas Šenavičius, Chair of the country’s Crowdfunding Association, and Invest Lithuania’s Gintarė Bačiulienė believe it’s entirely possible Collecting money from a large number of small retail investors via online platforms is seen by an increasingly number of startup and scaleup businesses as a good way to secure finance and build loyalty with customer stakeholders. But mainland Europe has lagged behind the rest of the world in using this type of investment vehicle. According to crowdfunder Fundly, in 2020 European businesses raised $6.48billion in crowdfunded revenues, compared ffnews.com
to $10.54billion in Asia, $17.2billion in North America; $24.16billion in Africa; $68.8billion in Oceania; and $85.74billion in South America. The problem was seen as divergent regulation in different EU member states, which restricted a fundraiser’s ability to seek cross-border cash. But we could be about to see a crowdfunding boom in the European Union, thanks to the new Regulation on European Crowdfunding Service Providers, which came into force in November. It seeks to super-charge peer-to-business lending by creating uniform rules for platforms, which can then ‘passport’ services across the bloc. One country already poised to make the most of the new regime is the small-but-fintech-mighty Lithuania. With an already well-developed digital finance ecosystem, including 18 crowdfunding platforms, it will, in all likelihood, be the first country to offer passporting for licensed platforms and looks well-placed to become the crowdfunding hub of Europe. What places the Baltic state of Lithuania, with a population of just 2.8 million, at the forefront of this revolution, is an established crowdfunding regulatory regime, inspired in part by the mature UK market.
“In Lithuania, we chose to create a legal system for this sector in 2016, to enable firms to work in a regulated and safe environment, but It has not [had] any unanimous regulation in the whole EU. Some countries had their own bespoke regimes, others didn’t or still don’t – it was a very fragmented legal system,” explains Jovita Aleksiūnė, a lawyer specialising in investment services at Bank of Lithuania. The country started looking at crowdfunding as an alternative form of finance due to circumstance. “Finance was very concentrated,” explains Vytautas Šenavičius, chairman of the Crowdfunding Association of Lithuania, “in that only a few per cent of all lending could come from alternative sources. A few large banks had the majority of the lending market. While there are a lot of different ways you could solve that, in Lithuania the idea was to do it through alternative finance by creating a bespoke regime.” Gintarė Bačiulienė, head of the technology team at government agency Invest Lithuania, said the government was very aware of the value of crowdfunding for small and medium-sized businesses. “Across the EU, we still see that the sector lacks access to funding from traditional sources,” she says. Issue 22 | TheFintechMagazine
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