The European Commission is being urged to use its European Social Fund (ESF) to fund loans through crowdfunding and peer-to-peer lending platforms across the continent.
The ESF invests in companies and initiatives to support jobs and fairer opportunities for all EU citizens and the European Crowdfunding Network (ECN) has said P2P lending platforms can provide a way of facilitating this.
A report by the ECN said the ESF typically backs the microfinance sector, which shares features with the P2P target market.
“Within the fintech ecosystem, crowdfunding platforms are of particular interest to small – and medium-sized enterprises (SMEs), microenterprises and socially oriented businesses,” the ECN said.
“Crowdfunding represents a unique opportunity to test the market readiness for virtually all types of venture, from micro companies and self-employed, up to start-ups and established SMEs.”
The ECN said the ESF provides a fertile ground in which to establish partnerships with crowdfunding platforms.
“Crowdfunding is relevant for businesses that face difficulties in accessing traditional credit, because of limited turnover, limited or no credit history of the entrepreneurs, lack of collateral, high-risk profile of the business concept and/or of the markets of reference,” the ECN said.
“Crowdfunding addresses the needs of individuals underserved by the traditional credit supply, such as new entrepreneurs, people belonging to vulnerable groups and people at risk of social exclusion.
“These individuals usually resort to alternative and innovative finance – including crowdfunding – when they set up a new business.”