The popularity of alternative finance rose in Spain and Benelux in 2016, at a time when corporates in both were less likely to tap mainstream banks for capital. In Spain, corporate respondents indicated they sourced a 48% share of their overall funding from alternative finance in 2016, against 14% last year.

After posting strong figures in 2015, thanks to new rules that allow insurers to invest 5% of their assets in alternative finance, the popularity of new funding sources in France dipped in 2016, to 32% from 41%. France remains the second most important direct lending market in Europe after the UK; French companies are expected to remain key drivers of alternative finance.

The two countries that posted the sharpest fall-off in alternative funding, Italy and the UK, also saw a rise in the popularity of direct bank lending. In the UK, alternative finance accounted for 23% of borrowers’ funding mix in 2016, against 47% in 2015 and 75% in 2014.

Both can be explained. British banks have begun to lend in earnest again. In Italy, the popularity of alternative financing seems to be stabilising, having dropped sharply in 2015, suggesting the formation of a core group of corporates at ease with innovative methods of capital formation. New rules are also helping bolster alternative finance providers in Italy. In February 2016, the government passed new laws allowing EU-based alternative investment funds to lend direct to Italian borrowers.

Germany remains a unique story, due to its distinctive ‘Three-Pillar-Banking-System’ – namely private commercial, public sector and cooperative banks – and its easy-to-use Schuldschein market, which helps corporates borrow direct from investors at low rates of interest.

Overall, the future looks promising. At both supranational (with the European Commission’s Capital Markets Union) and national level (with the likes of Italy working to tweak rules to foster new forms of capital deployment) alternative finance has the clear backing of regulators and legislators.