7/9/2023 0 Comments See finance alternatives1 Since banks establish long-term relations with their customers, they can collect more information on debtors and monitor what their loans are used for. These contributions can take the form of loans (crowdlending), shares in earnings (equity crowdfunding) or even advances on the sale of a new product.Įach channel has its strong points in terms of promoting economic growth, so they are complementary in nature. Projects are advertised on crowdfunding platforms and obtain funds via a large number of small contributions made directly by investors, mostly individuals. ![]() However, in addition to these two basic sources, widespread use of the internet is helping another channel to emerge based on the concept of crowdfunding. The capital market is actually made up of a number of different markets: in addition to the traditional stock and debt markets there are new specialised markets where instruments are traded to better manage risk (derivate markets) or to broaden the base of potential investors (securitization and structured finance markets). As will be argued in this article, more diversified sources of funding will allow borrowers to make the most of the advantages that each source offers although each alternative entails risks that must be taken into account.Īcademic literature tends to distinguish between two basic types of financing channels: one indirect, based on banks acting as intermediaries between depositors' savings and loans to borrowers and the other via the capital market, where those requiring funds obtain them directly from investors by exchanging different types of securities. To bring us closer to the US situation the European Commission has set itself the goal of integrating and fully developing the different European capital markets by creating a capital market union. ![]() Now that banking union has begun, the European Commission is focusing on two figures: European firms get approximately 80% of their external financing from banks and the remaining 20% by issuing bonds, while the figures in the US are, broadly speaking, the opposite.
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