• While venture capital and private equity are well-established funding options, crowdfunding is newer and growing faster
• Speakers at The Asian Banker Future of Finance Summit in Dubai explained how crowdfunding, tokenisation and new models for venture capital can help fill the gap
• Regulators are working on protecting investors while still enabling new funding models

 

Despite a need from small and medium enterprises (SMEs) for $4.5 trillion more in loans and the fact that at least half of the world’s labour force is working for SMEs, still, “nobody wants to finance SMEs”, stated Karma founder George Goognin. He explained that challenges for institutional investors and lenders are that SME lending is an unstructured market that is hard to consolidate and accurate financial information on SMEs is difficult to obtain. The gap is so bad, that many SMEs are failing due to a lack of funds.

Now, however, alternative financing is a growing option in a multitude of countries around the world.

Alternative financing has a wide array of products, from crowdfunding options such as invoice finance or direct lending to venture capital (VC) and private equity (PE) equity, shared Fundnel co-founder Sng Khai Lin. While VC and PE firms are well-established, crowdfunding is newer and growing faster. She added that because of the returns in the alternative finance sector and an increase in transparency, more non-institutional investments are going into this space, particularly online platform lending.

Venture capital and private equity

While VC firms still provide plenty of funding, the traditional journey of funding by friends and family, angels, VCs, and eventually PE, is broken, said Alain Falys, venture partner at Imperial Innovations. He cited two reasons: lack of liquidity in PE and a concentration of capital in a few cities, which does not fully reflect where innovation is...

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