Alternative lending and the second COVID wave


While COVID-19 infections are rising again all over Europe, investors must consider the impact on alternative lending, as well as what the market drivers will be going forward.

The baseline

First and foremost, it is necessary to understand where the baseline is for alternative lending in the EU.

Until the end of 2019, the development in loan originations followed a pattern of approximately doubling every 12 months, as seen in the following chart:

Figure 1 Development in EU loan origination (source: Brismo/Loan clear)

This development was interrupted when COVID-19 began to spread in Europe.

Based on our experience and the volumes we are currently seeing in the alternative lending market, the mostly likely outcome for loan origination will be that volumes decrease to around the levels last seen at the beginning of 2019. Basically, the market’s development has been set back by around one year.

Consequences of a setback

There are, of course, a number of implications accompanying such a setback. Several loan originators have already failed and are no longer in the alternative lending market. However, the strongest and best loan originators still have solid positive earnings and are increasing market share by moving into spaces left vacant by, other loan originators.

The first Q3 financial reports are already out, and loan originators reporting now are showing a good performance for the previous quarter.

The unsurprising conclusion is that, in a crisis, the best-run companies adapt quickly to the new situation and continue to earn money, while the rest struggle and consequently have to scale back or close their operations. From that perspective, the development in alternative lending is no different from other market segments.

The number of loan originators on a platform like Mintos has already shrunk by 20-25%, as the Fintech industry was very quick to adjust to the new situation.

Of course, borrowers are also in a difficult situation because of lockdowns and the general insecurity provoked by the pandemic. Many individuals in such a situation try to protect their most important economic items, namely their homes and cars.

A second COVID wave and macro-economic impact

The number of COVID-19 cases all over Europe is rising rapidly at the time of writing and it is highly likely that we at the beginning of a second wave. The only relatively good news in this respect is that fewer victims seem to require hospitalisation this time around, and the medical authorities are expected to be better prepared than they were before.

While the political response is hard to predict, it is difficult to envision another complete economic lockdown like the one we saw in March and April this year. It is more probable that the political response in most countries will be a clampdown on social events, with severe restrictions imposed on the entertainment and hospitality sectors.

As long as it is possible, schools and workplaces will be kept open in order to get the economy running again. In such a scenario, Germany will most likely lead the way by implementing large economic packages to stimulate the domestic economy. As it revives, the Germany economy will ultimately also pull up the Central and Eastern European economies with it.

In summary, the implication for investors in alternative lending with regard to the above is to invest in a diversified portfolio in areas like Central and Eastern Europe, where the underlying macro-economic development is favourable.

Kind regards

Gustav Jensen Tony Jønsson

Managing Director and Partner Partner

You can invest in alternative lending with Quantrom P2P Lending DAC by subscribing to our profit participation note on our website: or (Danish version) where more information for investors is also available.

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