Mini-bonds: an emerging link of the intermediation chain

Mini-bonds represent a financial innovation aimed at filling a gap in the 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. In this chapter we focus on a new form of bonds targeted to SMEs: mini-bonds, which were developed in the context of programs aimed at promoting economic growth and innovation leveraging on SMEs. Analyzing and comparing the mini-bonds markets in Europe (France, Germany, Italy, Spain and the United Kingdom) we find two emerging market models. In the model adopted in Italy and Spain, the issues are reserved to institutional and professional investors, well equipped to manage the risks related to the mini-bonds, and the trading is on a dedicated stock exchange market segment. In these cases, SME issuers benefit from simpler and less expensive issuing procedure and lower periodical information and regulatory requirements. The other model is the one adopted in France and, to some extent, in the United Kingdom: here the mini-bonds are sold through crowdfunding platforms to retail investors. 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 United Kingdom and Germany, also dedicated retail bond markets for SMEs have been opened, complementing the alternative equity markets for SMEs. Mini-bonds and the innovations they triggered enrich the chain of financial intermediation. Due to the novelty of these financial instruments and markets, the topics deserve further research and empirical analysis.