Balázs Gyimesi, OECD Observer
“Every crowd has a silver lining,” said P.T. Barnum, America’s “greatest showman”. For businesses, Barnum’s play on words is especially true: crowds are becoming something of a motherlode of funding for small and medium-sized enterprises (SMEs). With bank lending declining, smaller businesses are looking for alternative ways of financing. Thanks to the world wide web, they can now solicit funds not just from banks and professional investors, but from virtually anyone with internet access. This approach can take different forms. Besides crowdfunding (where many individual contributions–usually sourced online–make up the funding), examples include online invoice financing (where SMEs, for instance, can borrow online against unpaid invoices) and peer-to-peer lending activities (online services that match lenders with SME borrowers). Together, these funding opportunities constitute the online alternative finance market.
The volume of alternative financial instruments has generally increased in recent years. Looking at changes between 2013 and 2016, however, it is clear that the development and size of the alternative finance market varies greatly between countries. China is by far the largest market for online alternative financial instruments, expanding exponentially from US$5.6 billion in 2013 to US$243.28 billion in 2016. In comparison, the total market volume of the online alternative finance industry in the US amounted to only US$34.5 billion in 2016, despite a steep rise from US$4.4 billion in 2013. The European alternative finance market, on the other hand, has stayed well below the volume of the US and the Chinese markets, having raised US$2.1 billion in 2016 and only US$0.3 billion in 2013. The UK alternative finance industry has volumes well above that of the other EU28 countries combined, having raised over US$5.6 billion in 2016.
With rising volumes, alternative instruments increasingly complement traditional sources of financing, and this has called attention to the need for a regulatory framework for crowdfunding. In crafting regulation, however, governments should keep in mind how crucial online alternative finance is to businesses. With bank lending on the decrease, every small business needs its silver lining.
OECD (2018), Financing SMEs and Entrepreneurs 2018: An OECD Scoreboard, OECD Publishing, Paris. http://dx.doi.org/10.1787/fin_sme_ent-2018-en
Balázs Gyimesi, OECD Observer
“Sail, sail thy best, ship of democracy, […] With thee Time voyages in trust,” wrote American poet Walt Whitman in his poem “Song of democracy”. But do we trust democracy to take us in the right direction? In European countries, there is a clear relationship between how satisfied we are with democracy and how much we trust its most important institution–parliament. Believing that our elected representatives will act in our best interests is crucial to maintaining the legitimacy of democracy.
People who are more satisfied with democracy are also those who trust their assembly of elected representatives more. Switzerland and the Nordic countries, Denmark, Norway and Sweden, show the greatest satisfaction with democracy and highest level of trust in their parliament, whereas southern and eastern European countries such as Italy, Portugal and Slovenia trust their elected representatives less and are less satisfied with democracy overall.
Interestingly, Europeans trust parliament less than the legal system, and even the police, according to the European Social Survey.
But the nature of parliament is also that the voting public can keep it in check and change it completely, as elections from France and the US have demonstrated. Parliaments, in turn, know that while it is their job to discuss, contradict, argue, agree and oppose, they must do so in the public interest. Clearly, parliament can be vital in promoting better policies for better lives–the OECD Observer was launched by the Secretary-General 55 years ago in large part to inform parliaments of the organisation’s policy work. Today, with the Global Parliamentary Network, the OECD actively engages with members of parliament from around the world by providing them with analysis, data and expert opinion. It also creates a rather special space for MPs to hear about each other’s experiences and learn from them. After all, listening is fundamental to building trust. It is the wind in the sails of Walt Whitman’s democracy.
OECD (2017), How’s Life? 2017: Measuring Well-being, OECD Publishing, Paris. http://dx.doi.org/10.1787/how_life-2017-en
OECD Global Parliamentary Network, http://www.oecd.org/parliamentarians/
European Social Survey, http://www.europeansocialsurvey.org/