The Nordics have always been a hub for entrepreneurship, innovation and SME growth. With one of the world’s most business-friendly environments, it is no surprise that investors are lining up to get a piece of the action. As a chief risk officer or data scientist, you have the responsibility to assess, analyze and forecast trends in the market, and we have done the legwork for you. In this blog post, we will delve into the current state and future trends of SME lending in the Nordics.
Over 70% of SMEs in the Nordics region face constraints, including lack of funding, skilled workers, and time, greatly restricting their ability to expand operations.
Currently, SMEs in the Nordics have access to a range of financing options as compared to their counterparts in other regions. In fact, the region has the highest level of SME debt financing in Europe. According to a recent report by the Nordic Council of Ministers, SME lending increased by 11% in 2020, with an astounding 78% of the total amount of SME bank lending being directed towards start-ups, tech and digital firms. This highlights the potential of new businesses in these sectors and their contribution to economic growth.
Furthermore, we can expect newer and more innovative forms of financing to emerge in the Nordics. One such development is crowdlending or peer-to-peer lending which has seen meteoric growth in the region. A study by the University of Cambridge found that crowdlending in the Nordics grew by 36% in 2020 and reached €1.2bn, proving to be an attractive alternative to traditional loans.
Another trend set to grow is digitalization. With the rise of fintech companies, SMEs can now access and apply for loans online, saving time and resources. This has proven to be a game-changer for SMEs as they no longer have to navigate the tedious loan applications process via traditional banks. As technology continues to evolve, we expect digitalization to become even more integral to the lending process.
The future also seems promising for the sustainability agenda. Responsible banking practices and green investments have proven to be popular in the Nordics and we can expect more lenders to factor in environmental, social and governance criteria into their lending practices. This aligns with the region’s strong commitment to sustainability and clean energy.
Finally, we cannot overlook the impact of Covid-19 on the lending landscape. The pandemic has brought unprecedented challenges, leading lenders to re-assess their risk assessment strategies. Nevertheless, the Nordics have been swift in their response, with governments and banks offering support measures to aid businesses. Moreover, tech and digital start-ups have been able to adapt to the new normal of remote working with ease.
In conclusion, the future looks bright for SME lending in the Nordics. The region has always been at the forefront of innovation and technology, and we can expect to see newer forms of financing and more digitalization in the market. The Nordics’ commitment to sustainability and responsible banking practices is also commendable. As a chief risk officer or data scientist, keeping abreast of these trends will be essential for you and your team in designing effective risk management strategies. Ultimately, the Nordics’ SME lending landscape has made tremendous progress in the past few years, and with the right tools, we are sure to see even more growth in the future.