Low market cap countries drive European P2P growth
Countries with a lower market capitalisation relative to GDP represent almost half of all European peer-to-peer lending, a new study has found.
Analysts at Croatia-based P2P lending platform Robocash studied the investment attractiveness of European countries through the Buffett Indicator (BI) and compared it to the potential of the European P2P market. They found that 45 per cent of European P2P volume came from low-cap regions of Europe.
The analysts suggested that in these countries, the P2P market fills gaps in traditional bank financing for small businesses, while in high market cap economies, alternative lending remains a niche.
Read more: European P2P lending market sees cyclical wave of activity
“The Buffett Indicator is considered one of the traditional metrics for assessing a country’s investment image,” said the Robocash analysts.
“The higher the indicator, the more likely it is that the market is overheated. This may signal high stock prices and possible risks of market correction.”
According to the study, Denmark and Sweden are the most overvalued markets for investment with BI above 100 per cent. The funding volume of these two markets accounted for less than one per cent of the European P2P market by the end of 2024.
The list of the most undervalued markets includes Latvia, Slovakia and Lithuania, where the indicator is the lowest.
Robocash found that Latvia has the highest regional activity when it comes to P2P lending, followed by Germany and Finland. In total, their funding volume amounted to 46.4 per cent, or €25.6bn (£21.4bn) of the P2P market in continental Europe by the end of 2024.
Read more: European P2P investors expect 2025 returns of 10.64pc
“Many countries with low levels of P2P lending are dominated by either strong traditional banks or highly developed stock markets,” said the Robocash analysts.
“This further emphasises the fact that P2P lending is often an alternative to traditional financial instruments.
“We also see that BI itself is not directly correlated with P2P lending in Europe. However, when combined with other parameters such as asset ownership structure, availability of bank lending and regulatory features, it allows us to more accurately assess the growth potential of P2P lending in different countries.”
Read more: Investors unlikely to increase P2P allocations this year
