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This is to become especially significant when new Basel

Committee on Banking Supervision regulation deman-

ding a 300 per cent risk weight to be applied to small

business credit at the banks’ balance sheets go into

effect. Second, this kind of arrangement is mutually

beneficial for a number of reasons: the agreement is

a two-way venue, with the online portal also referring

its clients able to get traditional loans to the banks in

cases where it may be better suited to the borrower’s

needs and for other traditional banking services. In this

way, banks can focus on building relationships and provi-

ding a range of services for clients it deems more strategic

while also better managing its capital ratios in light of the

aforementioned new Basel rules.

Equity-based crowdfunding has also amassed public

attention, increasing its total volume raised from 5

million euro in 2012 to over 110 million just two years

later, according to a private report by Ernst & Young and

Cambridge University based on a survey with several of the

leading online platforms in the UK


. The importance of duly

regulating this market can be best understood when one

realizes that, as a new and inherently risky funding model,

a single big platform fail or rotten investment scheme can

have negative spillover effects. Thus, many platforms in

the UK actually sought to be regulated, and voluntarily

added risk warnings and disclaimers on their portals



before the Policy Statement by the Financial Conduct

Authority went into effect limiting the illiquid allocation of

individuals - unless they either have professional support,

or are considered high net worth or “qualified” investors,

measures that should be emulated elsewhere



Finally, the general perception towards collective

investment in the UK on meetings with British institutions

was that although it indeed had been playing a part in

improving the scene for SME financing, it would hardly in

the foreseeable future disrupt traditional banking primacy

nor eliminate SME funding constraints. This can be noted,

for instance, when one realizes that although the volume

of loans provided by the leading platform FC was over 1.3

billion pounds as of June, 2016, the number of individuals

who have lent through that portal was just over 50,000.




Where one reads, for instance, quoting a warning at crow-

: “The majority of start-up businesses fail or do not scale as

planned and therefore investing in these businesses may involve signifi-

cant risk. It is likely that you may lose all, or part, of your investment”.


In Brazil, the regulator CVM builds on pre-existing rules to

simplify the registration process provided that certain size parameters

are observed, but a specific framework focusing on this investment ap-

proach is still undergoing public debate in 2016, and the country’s lar-

gest online platforms are working via convertible debt issuance.


Fiscal incentives

Fiscal incentives, unless a due cost-benefit budget impact

assessment is provided, may be regarded by some

observers as wishful thinking – especially against the

current global economic setting, in which policymakers

face growing fiscal constraints arising from diminishing

tax receipts. Still, evidence support the key role played

by fiscal benefits to equity investments in micro and

small companies in the UK in recent years


. Thus, such

benefits should be considered by any country seeking

to improve SME funding possibilities, and private agents

should strive to advance the policy debate.

Indeed, Brazil has taken steps in this direction in 2014

with the exemption of income tax in investments in

SME’s stocks by individual investors. However, the lack

of a culture in stock investments (not to mention the

poor performance of the overall Brazilian market in

recent years) as well as the risk of steep losses stemming

from such have hampered significant outcomes from

this benefit. This point shed light on the importance of

the mechanisms of the benefits provided by the British

government, namely the SEIS, EIS and the VCT


. These

programs, offered for investments via different kinds

of platforms


, have in common that not only a fiscal

benefit will be obtained in case the initial investment

appreciates, but, if held for a relevant period, can

provide a substantial financial offsetting in case a young

business fails and the capital invested would otherwise

be lost.

Since fear of losing a significant part or all of its

investment is usually the main constraint burdening

the minds of individual savers, it is likely that similar

initiatives, tailored to each countries’ realities, would

achieve positive results and ultimately aid in job

generation with limited net budget impact, as it was

consensual among relevant institutions, it is happening

at some degree in the UK.


In particular, please see the document at http://www2.

deloitte-uk-taking-the-pulse-of-the-angel-market.pdf, whereby one can

note that around three quarters of investors surveyed said the fiscal be-

nefits available to investors in the UK were crucial in their decision to

invest, and 58% said they would in fact had invested less if such benefits

weren’t available.


For a detailed explanation of these schemes, we refer to: ht-



Usually crowdfunding, angel syndicates, etc. However, fiscal

incentives have also been provided in the UK to the banking industry,

focusing on challenger banks, via subsidized rates from the Treasury’s

Funding for Lending Scheme - provided that funds were lent to SME.