Mini-Bonds: An Emerging Link in the Intermediation Chain in Europe

Mini-bonds represent a financial innovation aimed at filling a gap in the financial offer of funding for SMEs. While there is a long tradition of specialized markets and intermediaries for SMEs access to equity financing, the bond segments is still underdeveloped although there is a positive complementarity of the two segments. Analyzing and comparing the mini-bonds markets in Europe (France, Germany, Italy, Spain and the UK) we find two market models. One is that adopted in Italy and Spain, where the issues are reserved to institutional and professional investors and the trading is on a dedicated stock exchange market segment. In these cases, the benefits to the SME issuers are in terms of simpler and less expensive issuing procedure and periodical information, regulatory requirements and they are motivated by the fact that professional investors are well-equipped to select investments and evaluate proposals and to monitor risks over time. The other model is that adopted in France and, in one experience, in the UK: here the markets are on crowdfunding platforms and investors are retailers. New rules and regulations have been set up in order to balance the needs of investors – disclosure and protection - and issuers – easy procedures and low issuing costs. In the UK and Germany, also dedicated retail bond markets for SMEs have been opened, complementing the alternative equity markets for SMEs. Sometimes mini-bond innovation triggers other innovations and all together enrich the chain of financial intermediation. The benefits often granted to SME issuing mini-bonds are part of programs aimed at promoting economic growth and innovation leveraging on SMEs. Due to the novelty of these financial instruments and markets, the topics deserve interesting further research and empirical analysis with different perspectives.