L Lu, ‘Promoting SME Finance in the Context of the Fintech Revolution: A Case Study of the UK’s Practice and Regulation’ (2018) 33 Banking and Finance Law Review 317-343

SME

In the UK, SMEs account for 99.9% of the total business population, 60% of the private sector employment, as well as 50% of the national GDP.

In November 2018, Dr Lerong Lu published an article “Promoting SME Finance in the Context of the Fintech Revolution: A Case Study of the UK’s Practice and Regulation” in Banking and Finance Law Review (2018), Vol. 33(3), pp. 317-343.

English Abstract: Small and medium-sized enterprises (SMEs) play a significant role in most European economies. In the UK, SMEs account for 99.9% of the total business population, 60% of the private sector employment, as well as 50% of the national GDP. However, they merely receive 17% of total business loans from the banking industry, whilst 83% of loans go to large corporations, since banks have become risk-averse after the global financial crisis. Meanwhile, the UK has witnessed a so-called financial technology (fintech) revolution in recent years, with the emergence of an alternative finance market channelling billions of pounds to SMEs annually. Arguably, fintech and alternative finance could possibly solve the long-term SME financing dilemma. Against this backdrop, this paper discusses and analyses the online peer-to-peer (P2P) lending market and digital-based challenger banks in the UK, explaining how alternative finance has been bridging the SME financing gap. Moreover, it also assesses the UK’s policies and regulatory framework over the burgeoning alternative finance market.

French Abstract: Les petites et moyennes entreprises (PME) jouent un roˆle de ́terminant dans la plupart des e ́conomies europe ́ennes. Au Royaume-Uni, les PME repre ́sentent 99,9 % du nombre total d’entreprises, 60 % des emplois dans le secteur prive ́ et 50 % du PIB. Cependant, elles ne rec ̧oivent que 17 % du total des preˆts accorde ́s aux entreprises par le secteur bancaire alors que 83 % des preˆts sont accorde ́s aux grandes entreprises, les banques ayant une aversion marque ́e pour le risque depuis la crise financie`re mondiale. Pendant ce temps, le Royaume-Uni a connu une soi- disant re ́volution de la technologie financie`re au cours des dernie`res anne ́es avec l’e ́mergence d’un marche ́ des capitaux non traditionnel ou` des milliards de livres sont preˆte ́es chaque anne ́e aux PME. Le financement non traditionnel et la technologie financie`re pourraient sans doute re ́soudre les proble`mes de financement des PME a` long terme. Dans ce contexte, le pre ́sent article aborde et analyse le marche ́ du preˆt en ligne entre particuliers et les nouvelles banques nume ́riques au Royaume-Uni, et explique comment le financement non traditionnel est en train de combler les besoins de financement des PME. Il commente e ́galement les politiques et le cadre re ́glementaire du Royaume-Uni concernant le marche ́ naissant du financement non traditionnel.

Keywords: SME Finance, Financial Technology, Fintech, Alternative Finance, P2P Lending, Loan-Based Crowdfunding, Challenger Bank, Financial Law, Financial Regulation, Banking Law, Company Law, Corporate Finance

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