EU Commissioner Jonathan Hill has spoken out in favour of ‘alternative’ sources of business finance, including crowdfunding and venture capital.

In an interview with CNBC, he cited the difficulties of SMEs being too reliant on traditional bank financing in the event of another global banking crisis. Hill, who is the Commissioner for Financial Services and Capital Markets, highlighted the need to diversity the sources of businesses finance to protect the EU’s economy.

“If you’ve got a system that’s very dependent on one source of funding, and you have a contraction in bank funding like we had, then that has a very real knock onto the economy,” Hill said on the side lines of the Ambrosetti Forum in Italy.

“If we can diversify and spread it, we can help also achieve a greater degree of financial stability,” he added.

Interestingly, it appears that many businesses are already aware of the difficulties; the use of crowdfunding has risen 167 percent globally since the last financial crisis as banks have refused to lend, and companies have been forced to explore other methods. Furthermore, the UK’s laissez-faire approach to regulation has encourage growth in the sector, with London becoming a world leader for new financial technology companies that often focus on alternative finance.

 

 

Miranda Wadham on 08/08/2015