TWINO

Alternative
Lending Index
powered by KPMG

Spring 2017
Introduction
Background of alternative lending in Europe
- Alternative lending or non-bank lending is a term used to describe a range of
borrowing alternatives available to consumers and businesses in addition to
traditional bank loans. These alternative options are commonly used when
traditional bank loans are not available to an individual or a business for a variety
of reasons.
- Alternative lending demonstrated remarkable growth in Europe after the financial
crisis of 2008, when the conventional way of financing via banks became more
stringent for both households and businesses.
- In addition, in recent years the alternative lending industry has evolved into online
alternative lending involving peer-to-peer (P2P) lending platforms - marketplaces
for loans issued by alternative lenders. The use of P2P platforms enables
alternative lenders to generate extra financing for further expansion of the industry.
- Although the alternative lending market is growing rapidly and gaining significance
in the household and small and medium business sector, to date there has been
no unified supervising body, regulation or framework for operations of the
alternative lending sector. The ECB acknowledges the existence of the alternative
lending market, but does not intend to monitor its development closely due to its
insignificant volume compared to the traditional lending, at least for the time being.
European Alternative Lending Index
- In the absence of official industry metrics, Alternative Lending Index has been
developed in cooperation between TWINO and KPMG to compare the lending
environment across European countries highlighting economies with favourable
environments for expansion of the alternative lending market.
- Please note that the index focuses exclusively on the lending environment in each
respective country and does not take into consideration regulation, although,
clearly, regulation directly impacts the development of the alternative lending
market in the given country.
- We also acknowledge that the index would change over time along with changes in
the components the index is built on. Therefore we intend to update this study to
highlight key changes across European countries.
2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
Document Classification: KPMG Public
Methodology
- We have gathered comparable data on 23 countries in Europe regarding the
general lending environment (4 components) and specific lending conditions for
households or businesses (5 components). Alternative Lending Index is comprised
of 9 components that are equally weighted to arrive at the overall country index.
Please refer to Annex 1 for the detailed method.
- The results are graded in the index on the scale from 0 to 10, where a higher
value applies to a country with a more favourable environment for the
expansion of alternative lending. As such, the index is higher for countries
that have a higher credit gap, lower probability of obtaining a loan or more
stringent loan issuance criteria in other words, where the alternative
lending can fill the current credit gap and other inefficiencies in the lending
market.
- Our research does not include the following European countries that currently lack
publicly accessible comparable data: Albania, Bosnia and Herzegovina, Bulgaria,
Croatia, Cyprus, Iceland, Luxembourg, Macedonia, Malta, Moldova, Norway,
Serbia, Switzerland.
Data sources
- Our analysis is based on the following main data sources:
- Periodic publications by the European Central Bank on credit gap, statistics on
the number of credit institutions, the amount of household credit per capita and
outstanding loans to non-financial corporations.
- Eurostat statistics on employment in financial services, cost of borrowing for
households and businesses;
- Doing business index for Getting credit index.
- For countries that are not members of the Economic and Monetary Union of the
European Union or the Euro area, we have collected data from central banks of the
respective countries, where these were available.
- Data for each of the countries in this is publication is presented as at 31 December
2016, unless stated otherwise.
2
Table of contents
Page
Countries Page Countries Page
Executive Summary 4
Austria 9 Latvia 21
Alternative Lending Index 2016 5
Belgium 10 Lithuania 22
European lending environment 2010-2016 7
Czech Republic 11 Netherlands 23
Alternative Lending Index by individual
8
countries Denmark 12 Poland 24

Annex 1: Methodology 32 Estonia 13 Portugal 25

Annex 2: Composition of Alternative Lending Index 34 Finland 14 Romania 26

Annex 3: Total volume of outstanding loans 35 France 15 Slovakia 27

Germany 16 Slovenia 28

Greece 17 Spain 29

Hungary 18 Sweden 30

Ireland 19 United Kingdom 31

Italy 20

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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Executive summary
Top countries in Alternative Lending Index
- The highest ranked countries for alternative lending in Europe are: Hungary,
Slovenia, Latvia, Poland, Romania, Greece and Ireland. These countries have
the highest potential for the development of alternative lending in Europe building
on the current gaps and inefficiencies in the traditional lending market.
- The 5 countries with highly efficient lending markets that leave little room for
alternative lenders are: France, Germany, Netherlands, Austria, Finland and
Sweden. In these countries the existing sources of financing available to
households and corporate borrowers are sufficient and the potential for the
development of alternative lending is considered to be relatively low.
Countries with the highest Alternative Lending Index and loan volume
- By combining the results of Alternative Lending Index with the overall lending
market size in the country included in the sample, we highlight the countries with
the highest market potential for alternative lending that offer high growth
opportunities in both relative and absolute terms.
- Countries with the highest market potential in terms of both the size of the
overall lending market and the alternative lending environment are: Poland,
Greece and Ireland.
- The closest runner-up countries with smaller lending markets include Hungary,
Slovenia, Latvia and Romania.
Large differences between households and businesses
- Comparing the availability of financing to households and businesses some
countries show significant differences between the two. The indices of businesses
for Estonia, Hungary, Italy and Netherlands are at least 2 index points lower than
those of households, implying that there is more room for alternative lending to
households.
- On the contrary, the business lending index for the UK is significantly higher than
that for the household borrowers, implying that it is easier for a household to
receive a loan compared to corporate borrowers.
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International"), a Swiss entity. All rights reserved.
Document Classification: KPMG Public
Key highlights on individual countries
- The credit gap for the United Kingdom and France is negative, which indicates that
the lending demand in these countries is met with a surplus.
- As concerns the size of the lending market, the leader is Germany with the total
outstanding loans of EUR 2.5 trillion, followed by France with outstanding loans
amounting to EUR 2.1 trillion. Germany is also the leader in the number of credit
institutions, with 1 694 credit institutions being located in Germany, which accounts
for approximately 34% of the total number of credit institutions in the Euro area.
- Ireland (78 institutions) is the top country by the number of credit institutions per 1
million inhabitants, with the nearest following countries Austria and Finland
following behind with 70 and 50 institutions, respectively.
- The Swedish households and businesses can borrow at the lowest interest rates in
Europe concurring with the fact that Swedish households are also the most
indebted.
European lending market highlights 2010-2016
- The aggregate European credit gap has increased by 12 percentage points
compared to 2010. In nominal terms, the credit gap reached EUR 410 billion at the
end of the third quarter of 2016 implying there are development opportunities for
alternative lenders.
- During 2010-2016 the total density of credit institutions per 1 million inhabitants
decreased from 19 in 2010 to 15 in 2016. At the same time, the cost of borrowing
for household and businesses has been decreasing over time.
Regulatory highlights
- The approach to regulation depends on the maturity of the alternative lending
industry in each jurisdiction. As suggested by Clifford and Chance (April, 2017), the
alternative lending industry in the future will continue to grow and become more
unified across Europe, we will see more proactive regulation on a local level, in
part driven by alternative lenders themselves but also other participants of the
market.
4
Executive summary

Alternative Lending Index 2016 (1/2) Countries with the highest potential for the
development of alternative lending based
on their lending environment
Average
4.4
Alternative Lending Index
#1 Hungary 6.6 High (5.1 10)
#2 Slovenia 5.9
Medium (4.0 5.0)
#3 Latvia 5.8
Low (0 3.9)
#4 Poland 5.8
#5 Romania 5.7 No data

#6 Greece 5.3
#7 Ireland 5.2
#8 Denmark 5.0 2.3

#9 Portugal 4.9 2.1 4.1

#10 Italy 4.3

Spain 5.8
#11 4.3
#12 Estonia 4.1 5.0
4.0
#13 Czech Republic 4.0
#14 Belgium 4.0 5.2
3.3 3.3
#15 Lithuania 4.0 5.8
4.0
#16 Slovakia 4.0 4.0
4.0
#17 United Kingdom 4.0
3.6 4.0
#18 France 3.6 2.8
6.6
#19 Germany 3.3
5.9
#20 Netherlands 3.3 5.7
#21 Austria 2.8
#22 Finland 2.3
4.3 4.3
#23 Sweden 2.1
- 1 2 3 4 5 6 7 8 9 10 4.9
Alternative Lending Index 5.3
Note: Please see Alternative Lending Index decomposed into general environment, indebtedness and interest rates indices in Annex 2
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Executive summary

Alternative Lending Index 2016 (2/2) Countries with the highest potential for
development of alternative lending based
on lending environment and market size

Alternative Lending Index and market size matrix

- Favourable environment for growth of the alternative

lending industry:
>EUR 500 bn

France
Italy - Poland, Greece and Ireland that have a high Alternative
High

Germany
Spain Lending Index and medium sized markets can be seen as
Netherlands
United Kingdom the countries with the highest potential for the growth of the
Sweden
alternative lending industry;
- Top countries by Alternative Lending Index including
Hungary, Slovenia, Latvia, and Romania have a high
Volume of loans

potential for growth of alternative lending, but these are

>EUR 100 bn

economies with comparably low volumes of loans;

Medium

Denmark Poland
Austria
Portugal Greece - The other group of countries with a high potential for the
Finland
Belgium Ireland
development of alternative lending are Italy, Spain and UK,
which have a medium Alternative Lending Index and a
large market size.
- Countries with a less favourable alternative lending
environment: France, Germany, the Netherlands, Sweden,
<EUR 100 bn

Estonia Hungary Austria and Finland all feature an efficient traditional lending
Czech Republic Slovenia
Low

environment with less room for the development of alternative

Lithuania Latvia
Slovakia Romania
lending, although these are large markets.

Low Medium High

0 3.9 4.0 5.0 5.1 - 10

Alternative Lending Index
Note: Please see the volume of household and business loans in detail in Annex 3

Poland, Greece and Ireland - countries with high Alternative Lending Index and a medium volume of loans have favourable
opportunities for expansion of alternative lending.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Executive summary

European lending environment 2010-2016

Getting Credit Index Credit Gap Indebtedness of businesses
(Total loans to non financial
(Score from 0-100) (Aggregate credit gap, in billions EUR and as % of GDP)
corporations / gross domestic product)
14.0%
69 1,000 15.0%
11.3%
67 10.4% 10.0%
800 12.0% 46%
45%
65 528 44% 44%
600 9.0%
62.6 363 410
63 62.2 4.2% 360 42% 41%
62.0 400 6.0%
61 1.7% 40% 39%
200 142 3.0% 38%
59 38%
(20)
- - 36% 35%
57 55 36%
(200) (0.6%) (3.0%) 34%
55
2010 2011 2012 2013 2014 2015 Q3 32%
2015 2016 2017
2016
30%
Credit Gap Credit Gap as % of GDP 2010 2011 2012 2013 2014 2015 2016
Note: Aggregate credit gap had been computed by
KPMG, using individual values

Cost of borrowing for households and businesses Indebtedness of households

Density of credit institutions
(Interest rate on loans to non financial corporations, consumption and (Total household loans per capita /
(Number of credit institutions per 1 million inhabitants) mortgage loans for households, annual percentage rate of charge) Annual income per capita, percent)
21 14% 100% 99% 99%
20 12% 98% 97%
96% 96% 95%
19 95%
19 19 10% 94%
94%
18 9.1%
18 18 8% 92%
90%
17 17 6%
88%
16
16 4% 86%
15 2.6% 84%
15 2% 2.4%
82%
14 - 80%
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Consumption loans Mortgage loans Corporate loans
(household) (household)

Better general lending environment Higher cost of borrowing means higher

Lower indebtedness means higher
means worse opportunities for potential for development of alternative
potential for alternative lending
alternative lending lending

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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO
Alternative
Lending Index
by individual
countries
TWINO Alternative Lending Index Average

Austria Low
2.8

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)
40%
10 8.0% 8.0% 8%
7.4%
7.0% 8% 45.7%
8 30%
6.2 6.3 40.0% 6%
5.8 5.5 6%
6
60 4% 20%
55 4%
4
2% 10%
2 2%

- - - -
Q4 15 Q1 16 Q2 16 Q3 16 Jan 2014 Dec 2016 Jan 2014 Dec 2016
Austria Euro Area Austria Euro area Austria Euro area
Austria Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
70
Indebtedness of households Cost of borrowing on mortgages
(households)
(Total household loans per capita / (Interest rate on mortgage loans to
Annual income per capita, percent) households, annual percentage rate of
charge)
6%

4%
2.24%
75.0% 76.5%
1.80%
2%
15

-
Jan 2014 Dec 2016
Austria Euro area Austria Euro area Austria Euro area
Austria Euro area

The general lending environment in Austria is well developed and it has the second highest density of credit institutions in Europe.
Due to a relatively low cost of borrowing the indebtedness of households and businesses is above the Euro area average.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Belgium Medium
4.0

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

10 40%
7.9% 8%
8%
8
6% 40.0% 30%
6 6%
2.9% 4%
4 29.0%
2% 4% 20%
55 2 (0.1%)
(2.8) -
45 -
7.6 (0.1) 2.8 2% 10%
(2) (2%)
(4) (2.9%) (4%)
- -
Belgium Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Belgium Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Belgium Euro area
Belgium Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%

76.5%
1.80% 65.7%

1.40% 2%
15
8

-
Belgium Euro area Jan 2014 Dec 2016
Belgium Euro area Belgium Euro area
Belgium Euro area

Alternative Lending Index in Belgium is lower than the Euro area average as its credit gap is low and the cost of borrowing is lower
than in the Euro area.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Czech Republic Medium

4.0

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

1.0 40%
0.8% 8%
0.6% 1%
0.5 40.0% 30%
70 0.1% 6%
0.2
(0.4) 20%
55 - 4%
0.3 0.1 20.7%

(0.5) 2% 10%

(1.0) (1.0%) (1%) - -

Jan 2014 Dec 2016 Jan 2014 Dec 2016
Czech Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Czech Euro area Czech Republic
Czech Republic
Republic Republic Euro area
Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%

76.5%
1.80%
55.7%
2%
1.21%
15
5
-
Czech Euro area Jan 2014 Dec 2016
Czech Euro area Czech Euro area
Republic Republic Republic Czech Republic
Euro area

Credit is generally easy accessible and the cost of borrowing converges with the average of the Euro area, although, the
indebtedness of Czech borrowers remains below the average.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Denmark Denmark
5.0

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

32.5% 33.0% 32.1% 40%

30.9% 8%
30 35%

20.8 21.3 20.9 28% 40.0% 6% 30%

70 20.2
20
21% 20%
55 4%
14% 16.6%
10
2% 10%
7%

- - - -
Denmark Euro Area Denmark Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Q4 15 Q1 16 Q2 16 Q3 16 Denmark Euro area
Denmark Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%

2.01% 76.5%
1.80%
2%
19 34.0%
15

-
Denmark Euro area Jan 2014 Dec 2016
Denmark Euro area Denmark Euro area
Denmark Euro area

Denmark has a relatively highly developed lending environment, although the credit gap in the economy implies there are
opportunities for alternative lending as the indebtedness of households and businesses is well below the Euro area average.
2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 12
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Estonia Medium
4.1

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

40%
11.8% 8%
0.8 10.8% 11.0%
10.1% 12%
6% 30%
70 0.6 0.5 40.0%
0.5 0.5 35.9%
0.4
8% 20%
4%
55 0.4

4% 2% 10%
0.2

- - - -
Estonia Euro Area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Q4 15 Q1 16 Q2 16 Q3 16 Estonia Euro area Estonia Euro area
Estonia Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%

76.5%
1.80% 66.1%
27 2%
1.22%
15

-
Jan 2014 Dec 2016
Estonia Euro area Estonia Euro area Estonia Euro area
Estonia Euro area

Access to credit and the density of credit institutions is relatively high in Estonia, resulting in one of the best lending environments in
Europe. The cost of borrowing for households remains higher than the Euro area average.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Finland Low
2.3

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loan to non financial (Interest rate on consumption loan to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

5.0 4.4% 5% 40%

8%
4.0 3.6%
3.0 3% 30%
40.0% 6%
2.0 36.3%
65
1.0 (0.5) 1% 20%
55 (0.9) 4%
-
1.7 2.1
(1.0) (1%) 10%
2%
(2.0)
(1.9%) (1.0%)
(3.0) (3%) -
-
Q4 15 Q1 16 Q2 16 Q3 16 Jan 2014 Dec 2016 Jan 2014 Dec 2016
Finland Euro Area Finland Euro area Finland Euro area
Finland Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to
households, annual percentage rate of charge)
6%

4%
50 90.6%
76.5%
1.80%
2%
1.20%
15

-
Finland Euro area Jan 2014 Dec 2016
Finland Euro area Finland Euro area
Finland Euro area

Historically low cost of borrowing for households and businesses has led to relatively high levels of indebtedness in Finland. Finland
has one of the best general lending environments in Europe.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

France Low
3.6

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)
-0.8 40%
- 8%
(0%)
-1.8 -2.4 (0%)
(0.2%) 43.1% 30%
40.0% 6%
(5) (1%)
(0.3%)
(0.5%) (1%)
4% 20%
55 -7.3 (1%)
50 (10)
(1%)
2% 10%
(1%)
(15) (1.4%) (2%)
- -
Q4 15 Q1 16 Q2 16 Q3 16 Jan 2014 Dec 2016 Jan 2014 Dec 2016
France Euro Area France Euro area France Euro area
France Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
2.08% 79.7% 76.5%
1.80%
2%
15
7
-
France Euro area Jan 2014 Dec 2016
France Euro area France Euro area
France Euro area

France is one of the 2 countries with a negative credit gap and a higher than average indebtedness of households and businesses.
Surprisingly, its scores below the average in the Getting Credit Index.
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Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Germany Low
3.3

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

8% 40%
6.4%
5.7% 7%
5.6%
60 5.1% 6% 30%
6%
70 45.0 5% 40.0%
45 40.1 39.6
36.1
4% 29.9% 4% 20%
55
30 3%
2% 2% 10%
15
1%
- - - -
Germany Euro Area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Q4 15 Q1 16 Q2 16 Q3 16 Germany Euro area Germany Euro area
Germany Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
77.7% 76.5%
1.80% 1.80%
2%
21
15

-
Germany Euro area Jan 2014 Dec 2016
Germany Euro area Germany Euro area
Germany Euro area

The German lending market is largely self sufficient and meets the domestic credit demand. The cost of borrowing is at the Euro
area level for households and businesses and below the Euro area for mortgages.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Greece High
5.3

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

16.6% 40%
12 8%
14.6% 50.4%
16%
10 12.6% 30%
11.6% 7.7 40.0% 6%
8 6.7 12%
5.4 5.8
4% 20%
55 6
8%
50
4
2% 10%
4%
2
- - - -
Jan 2014 Dec 2016 Jan 2014 Dec 2016
Greece Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Greece Euro area Greece Euro area
Greece Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households, annual
percentage rate of charge)
6%

4%

70.9% 76.5%
1.74% 1.80%
2%
15
3
-
Jan 2014 Dec 2016
Greece Euro area Greece Euro area Greece Euro area
Greece Euro area

Greek businesses maintain a high level of indebtedness in the presence of a relatively high cost of borrowing. The estimated credit
gap is growing constantly resulting in a high Alternative Lending Index.
2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 17
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Hungary High
6.6

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

38.0% 40%
36.2% 35.9% 40% 8%
12 33.6%
75 9.4 30%
10 8.7 8.6 30% 40.0% 6%
8.1
8
20% 4% 20%
55 6
17.0%
4 10%
10% 2%
2
- - - -
Jan 2014 Dec 2016 Jan 2014 Dec 2016
Hungary Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Hungary Euro area Hungary Euro area
Hungary Euro area

Employment in financial Density of credit institutions Indebtedness of households Cost of borrowing on mortgages
services (households)
(Employed in financial services (Number of credit institutions (Total household loans per capita / (Interest rate on mortgage loans to households,
as % of total employment) per 1 million inhabitants) Annual income per capita, percent) annual percentage rate of charge)

* Data not available

76.5%
1.80%
1.37%
15 28.1%
10

Hungary Euro area Hungary Euro area Hungary Euro area

Hungary has a high Alternative Lending Index, as the indebtedness of households and businesses is significantly below the Euro
area average, and the cost of borrowing for households is more than 3 times higher than that in the Euro area.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Ireland High
5.2

4.4
6.3

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

40%
8%
60 50.1%
49% 40.0% 6% 30%
70 50
42%
40 25.9% 30.6 35%
4% 20%
55 21.5% 28%
30
17.9%
15.1 21%
20 12.6 10%
6.3% 14% 2%
10 7%
3.7
- - - -
Ireland Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Ireland Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Ireland Euro area
Ireland Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

3.17% 78

4%
76.5%
68.7%
1.72%
2%
15

-
Jan 2014 Dec 2016
Ireland Europe Ireland Europe Ireland Euro area
Ireland Euro area

The highly developed general lending environment in Ireland has not been able to meet the credit demand as the credit gap has
increased dramatically, resulting in a high Alternative Lending Index for the country.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Italy Medium
4.3

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)
40%
8%
17.7% 20% 46.9%
90 17.0% 17.2%
15.4% 30%
69.3 40.0% 6%
75 66.5 67.3 15%
60.0
60 20%
10% 4%
55 45
45 30 10%
5% 2%
15
- - - -
Jan 2014 Dec 2016 Jan 2014 Dec 2016
Italy Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Italy Euro area Italy Euro area
Italy Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
76.5%
1.76% 1.80%
56.4%
2%
15
10

-
Italy Euro area Italy Euro area Jan 2014 Dec 2016
Italy Euro area
Italy Euro area

It is relatively difficult to obtain a loan in Italy and the credit gap is significant, while the Alternative Lending Index is at the European
average. Italy does not have a high Alternative Lending Index due to the high indebtedness of businesses and the cost of borrowing
being only slightly above the Euro area average.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Latvia High
5.8

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

8% 40%
31.6%
85 2.5 35%
28.2% 28.1%
23.4% 30% 30%
2.0 1.7 6%
1.5 25% 40.0%
1.5
1.5 1.3
20% 28.0% 4% 20%
55
1.0 15%
10% 2% 10%
0.5
5%
- - - -
Latvia Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Jan 2014 Dec 2016 Jan 2014 Dec 2016
Latvia Euro area Latvia Euro area
Latvia Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
2.25% 76.5%
1.80%
29 2%
15 30.6%

-
Jan 2014 Dec 2016
Latvia Euro area Latvia Euro area Latvia Euro area
Latvia Euro area

Despite being one of the top countries as concerns the ease of obtaining a loan, the wide spread for the cost of borrowing for
household consumption and the relatively low level of indebtedness combined with a significant credit gap results in a high
Alternative Lending Index for Latvia.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Lithuania Medium
4.0

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)
40%
13.2% 8%
1.6
10.4% 12% 30%
1.1 6%
70 1.2 8.4% 40.0%
0.9
6.4% 8% 4% 20%
55 0.8 0.7
21.5%
0.6
0.4 4% 2% 10%

- - - -
Jan 2014 Dec 2016 Jan 2014 Dec 2016
Lithuania Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Lithuania Euro area Lithuania Euro area
Lithuania Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%

76.5%
1.80%
30 50.6% 2%
15
0.91%

-
Lithuania Euro area Jan 2014 Dec 2016
Lithuania Euro area Lithuania Euro area
Lithuania Euro area

Lithuania has a relatively efficient lending market, with the credit gap in 2016 decreasing from 13.2% to 6.4%. The cost of borrowing
for household mortgages and businesses has been on a par with the average of the Euro area.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Netherlands Low
3.3

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

22.9% 23.2% 40%

21.5% 21.2% 25% 8%
54.5%
45 38.0 38.6 20% 30%
35.3 35.7 40.0% 6%

15%
30 4% 20%
55
50 10%
15 2% 10%
5%

- - - -
Netherlands Euro Area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Q4 15 Q1 16 Q2 16 Q3 16 Netherlands Euro area Netherlands Euro area
Netherlands Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

94.7% 4%
76.5%
1.69% 1.80%
2%
15
6
-
Netherlands Euro area Jan 2014 Dec 2016
Netherlands Euro area Netherlands Euro area
Netherlands Euro area

The relatively high level of indebtedness of households and businesses as well as the relatively low cost of borrowing results in an
overall low Alternative Lending Index, despite the high credit gap estimated by the ECB.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Poland High
5.8

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

40%
6.3% 8%
12 6.1% 7%
5.6%
10 4.7% 6% 30%
75 6%
40.0%
5%
8 6.3 6.1 6.0 5.6 4% 4% 20%
55 6
3% 16.8%
4
2% 2% 10%
2 1%
- - - -
Q4 15 Q1 16 Q2 16 Q3 16 Poland Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Poland Euro Area Poland Euro area
Poland Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%

76.5%
1.80%
1.61% 52.7% 2%
16 15

-
Jan 2014 Dec 2016
Poland Euro area Poland Euro area Poland Euro area
Poland Euro area

Poland is an attractive lending market with a high Alternative Lending Index due to the low level of indebtedness of households and
businesses as well as a higher cost of borrowing compared to the Euro area average.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Portugal Medium
4.9

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)
40%
43.7% 44.4% 8%
30 41.1% 42.9% 50%
41.7% 30%
40% 40.0% 6%
18.5 18.9 19.4
20 17.7
30% 20%
4%
55
20%
45 10
2% 10%
10%

- - - -
Q4 15 Q1 16 Q2 16 Q3 16 Portugal Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Portugal Euro Area Portugal Euro area
Portugal Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

107.2%
4%
76.5%
1.73% 1.80%
2%
14 15

-
Jan 2014 Dec 2016
Portugal Euro area Portugal Euro area Portugal Euro area
Portugal Euro area

The large credit gap and a slightly higher than the Euro area average cost of borrowing for households and businesses have
resulted in an index being higher than the European average.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Romania High
5.7

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

11.8% 40%
6 8%
85 12%
9.9% 9.7%
5 8.5% 30%
4.0 40.0% 6%
4 3.4 3.3 8%
3.0 20%
55 3 4%

2 4% 13.2%
2% 10%
1
- - - -
Jan 2014 Dec 2016 Jan 2014 Dec 2016
Romania Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Romania Euro area Romania Euro area
Romania Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
76.5%
1.80%
2%
1.12% 24.6%
15
2
-
Romania Euro area Jan 2014 Dec 2016
Romania Euro area Romania Euro area
Romania Euro area

Due to its low level of indebtedness of household and corporate borrowers, as well as a higher than the average cost of borrowing
Romania has a high Alternative Lending Index. This is notwithstanding the top rank in Getting Credit index.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Slovakia Medium
4.0

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

7.5% 40%
8%
2.0 8%
6.3% 6.1%
1.5 30%
5.2% 40.0% 6%
1.5 6%
65 1.2 1.2
1.0 4% 20%
55 1.0 4% 21.1%

0.5 2% 2% 10%

- - - -
Slovakia Euro Area Q4 15 Q1 16 Q2 16 Q3 16 Slovakia Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Slovakia Euro area
Slovakia Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
78.3%
76.5%
1.80%
2%
1.13% 15
5
-
Slovakia Euro area Jan 2014 Dec 2016
Slovakia Euro area Slovakia Euro area
Slovakia Euro area

The spread between the cost of borrowing for households and businesses with the rest of the Euro area has decreased in the
recent years, resulting in a low Alternative Lending Index for Slovakia.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Slovenia High
5.9

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

40%
35.6% 35.3% 8%
5 34.8% 34.7% 40%

4 40.0% 6% 30%
3.2 3.3 3.3 3.3 30%
3 20%
55 20% 23.4% 4%
2
10% 2% 10%
35 1

- - - -
Slovenia Euro Area Slovenia Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Q4 15 Q1 16 Q2 16 Q3 16 Slovenia Euro area
Slovenia Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
76.5%
1.80%
43.4% 2%
1.26%
15
9
-
Slovenia Euro area Jan 2014 Dec 2016
Slovenia Euro area Slovenia Euro area
Slovenia Euro area

General difficulty to obtain a loan in Slovenia, a relatively low level of indebtedness of households and businesses as well as the low
density of credit institutions are the main reasons for the high Alternative Lending Index for the country.
2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 28
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Spain Medium
4.3

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)
40%
53.8% 55.0% 54.8% 54.8% 8%
60%
200 45.8%
50% 30%
145.5 149.8 150.7 151.7 40.0% 6%
160
40%
60 120 4% 20%
55 30%
80 20%
2% 10%
40 10%
- - - -
Q4 15 Q1 16 Q2 16 Q3 16 Spain Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Spain Euro Area Spain Euro area
Spain Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
86.7%
76.5%
1.80%
1.51% 2%
15
4
-
Spain Euro area Jan 2014 Dec 2016
Spain Euro area Spain Euro area
Spain Euro area

Alternative Lending Index of Spain is close to the average. Its enormous credit gap (the highest in Europe) is set back by already
relatively high indebtedness of households and businesses as well as the relatively low cost of borrowing.

2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 29
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

Sweden Low
2.1

4.4

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

40%
8%
9.0% 10%
14 7.9% 46.6%
7.6% 40.0% 6% 30%
12 8%
9.4
10 8.4
8.2 6% 20%
55 55 8 4%
3.1%
6 4%
4 3.3 2% 10%
2%
2
- - - -
Sweden Euro Area Sweden Euro area Jan 2014 Dec 2016 Jan 2014 Dec 2016
Q4 15 Q1 16 Q2 16 Q3 16 Sweden Euro area
Sweden Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
133.9%
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
76.5%
1.80%
2%
1.22% 16 15

-
Sweden Euro area Jan 2014 Dec 2016
Sweden Euro area Sweden Euro area
Sweden Euro area

Sweden with its cost of borrowing below the Euro area average receives the lowest index and implies the lowest potential for
development of the alternative lending market.
2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 30
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

TWINO Alternative Lending Index Average

United Kingdom Medium

4.0

4.4
6.3

General lending environment Indebtedness Cost of borrowing

(Source: Doing Business Index, Eurostat) (Source: ECB, Eurostat)
(Source: ECB, Eurostat)

Getting Credit Index Credit Gap Indebtedness of businesses Cost of borrowing for businesses Cost of borrowing for households
(Score from 0-100) (Aggregate credit gap, in billions EUR and (Total loans to non financial (Interest rate on loans to non financial (Interest rate on consumption loans to
as % of GDP) corporations / gross domestic product) corporations, annual percentage rate households, annual percentage rate of
of charge) charge)

150 19.7% 21% 40%

8%
14.5%
100.5
75 100 14% 40.0% 6% 30%

50 3.1% 7% 4% 20%
55
19.0%
(22.0)
- - 2% 10%
73.8 15.7

(50) (4.3%) (7%) - -

Q4 15 Q1 16 Q2 16 Q3 16 United Euro area Mar 2015 Dec 2016 Mar 2015 Dec 2016
United Euro Area United Kingdom
Kingdom Kingdom United Kingdom Euro area Euro area

Employment in financial
services
(Employed in financial services
as % of total employment)
Density of credit institutions
(Number of credit institutions
per 1 million inhabitants)
Indebtedness of households
(Total household loans per capita /
Annual income per capita, percent)
Cost of borrowing on mortgages
(households)
(Interest rate on mortgage loans to households,
annual percentage rate of charge)
6%

4%
75.3% 76.5%
1.77% 1.80%
2%
15
5
-
Mar 2015 Dec 2016
United Euro area United Euro area United Euro area
Kingdom Kingdom Kingdom United Kingdom
Euro area

In 2016 the UK closed its credit gap and reached a credit surplus of 4.3%. In the recent years the cost of borrowing in the UK has
remained relatively close to the Euro area average, which has resulted in a medium Alternative Lending Index for the UK.
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International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Annex 1

Methodology (1 of 2)
Dimension Variable
- Lending Environment Credit Gap
Employment in financial services
Getting Credit Index (0-100)
Density of credit institutions
- Indebtedness Indebtedness of households
Indebtedness of businesses
Interest rate on consumption loans for
- Households
households
Interest rate on mortgages
Cost of borrowing for businesses
Note: MFIs monetary financial institutions
Form Source
European Central Bank, Bank of International
Credit gap as % of total GDP
Settlements
Employment in financial services / Total employment in the country, as % Eurostat
Getting Credit Index (0-100) Doing Business Index
Number of credit institutions / Population in millions, as % European Central Bank
Total household credit per capita/Total annual net income per capita, as % European Central Bank, Eurostat
Total corporate loans outstanding / GDP, as % European Central Bank, Eurostat
Aggregate MFIs interest rate on new business, as % Eurostat, Central Banks of respective countries
Aggregate MFIs interest rate on new business, as % Eurostat, Central Banks of respective countries
Aggregate MFIs interest rate on new business, as % Eurostat, Central Banks of respective countries

- General Lending Environment: there are four variables to evaluate the general
lending environment credit gap, employment in financial services as compared
to total employment, getting credit index, and density of credit institutions.
- Credit gap the variable is measured as per cent of GDP, in order not to
account for the size of economy. Credit gap is calculated as the difference
between actual loans to GDP ratio and the long term trend of loans to GDP
ratio. The long term trend of loans to GDP ratio had been estimated by the
European Central Bank and the Bank of International Settlements using The
Hodrick-Prescott filter. The variable has a positive contribution to the index,
meaning, the higher the credit gap in the country, the more underserved the
- Indebtedness: measures the debt burden of households and businesses.
market is.
- Employment in financial services the variable is measured as the total
employment in financial services divided by the total employment in the
country. The variable has a positive relationship with the index, the higher the
employment in the financial services, the more potential for the development
of alternative lending.
2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG
International"), a Swiss entity. All rights reserved.
- Getting credit index the variable is measured as an index between 0 and
100, with 100 indicating that credit is easily accessible in the country.
Therefore, higher values have a negative contribution to Alternative Lending
Index, indicating that the existing lending market is well developed.
- Density of credit institutions the variable is measured as the number of
credit institutions in the country divided by total population (aged 15+). The
variable has a negative effect on the Alternative Lending Index as the higher
the number of credit institutions, the more difficult it is for new lenders to step
in.
- Indebtedness of households the variable is measured as the total
outstanding loans per capita at the end of the year divided by net annual
income per capita. The variable contributes negatively to the index; the higher
the indebtedness of households, the less additional borrowing they need.
- Indebtedness of businesses the variable is measured as the total
outstanding corporate loans at the end of the year divided by total annual
gross domestic product. The variable contributes negatively to the index;
higher indebtedness of businesses is associated with a higher leverage and
lower demand for additional borrowing.
32

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Annex 1

Methodology (2 of 2)
- Cost of borrowing: is measured across three categories, indicating affordability
of entities to offer alternative lending.
- Interest rate on consumption loans the variable is measured as an annual
percentage rate of charge on new issues of consumption loans. The variable
has a positive effect on the index. The higher the interest rate on consumption
loans, the more opportunities there are for alternative lenders to provide
additional lending.
- Interest rate on mortgages the variable is measured as an annual
percentage rate of charge on new issues of mortgage loans. The variable
also has a positive relationship with the index, meaning, the higher the
interest rate, the more opportunities there are for alternative lenders to
provide borrowing.
- Interest rate on loans to non-financial institutions the variable is measured
as an annual percentage rate of charge on new loan issues. The variable
contributes positively to the index, meaning, the higher the interest rate, the
more underserved the market is, implying there is potential for alternative
lenders to provide additional loans.
Limitations of the research: KPMG acknowledges that this research may not
completely represent the actual market situation and the following aspects should be
taken into account when evaluating the results.
- Regulatory aspects: As indicated earlier in the research, regulation plays a
crucial role in the lending market and may be the key aspect which explains the
differences observed between the actual market situation and the results of this
research. Many economies have not yet developed regulations for alternative
lending, which makes these countries more attractive to alternative lenders than
strictly regulated markets.
- Omitted variable bias: Apart from regulatory aspects, there are other factors in
economies which may affect the results in one or the other way. Such factors
could be competition between existing players, possibilities for recoverability in
case of defaults, the role of debt market in the economy, economies openness to
foreign investors, future growth prospects of the country, political uncertainty and
many more. These factors require qualitative evaluation rather than quantitative.

2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 33
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Annex 2

Composition of Alternative Lending Index

Results for Alternative Lending Index - 2016
Alternative General lending
Ranking Country Busines lending Household lending Higher general lending environment index
Lending Index environment
means better opportunities for alternative
1 Hungary 6.6 4.8 7.1 9.8 lending
2 Slovenia 5.9 6.8 5.5 4.8
3 Latvia 5.8 4.3 5.9 7.9
4 Poland 5.8 3.5 7.8 7.7 Higher business lending index means higher
5 Romania 5.7 3.3 8.5 7.0 potential for development of alternative
6 Greece 5.3 5.5 5.5 5.0 lending
7 Ireland 5.2 5.2 5.9 4.7
8 Denmark 5.0 5.0 5.0 5.0
9 Portugal 4.9 6.6 3.7 3.3 Higher household lending index means higher
10 Italy 4.3 5.7 1.7 4.2 potential for alternative lending
11 Spain 4.3 6.3 1.8 3.2
12 Estonia 4.1 3.0 3.7 5.8
13 Czech Republic 4.0 3.3 4.8 4.5
Higher Alternative Lending Index means
14 Belgium 4.0 4.7 3.7 3.3
higher potential for alternative lending
15 Lithuania 4.0 2.4 5.6 5.1
16 Slovakia 4.0 3.7 5.0 3.7
17 United Kingdom 4.0 3.6 5.6 3.3
18 France 3.6 5.0 1.5 3.1
19 Germany 3.3 3.6 3.7 2.7
20 Netherlands 3.3 5.5 0.1 2.4
21 Austria 2.8 2.9 1.6 3.5
22 Finland 2.3 2.2 2.7 2.1
23 Sweden 2.1 3.9 1.0 0.5

Source: KPMG analysis 4 components 2 components 3 components

Alternative Lending Index has equal weights of all

individual components.

2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 34
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

Annex 3

Total volume of outstanding loans

Total volume of household and business loans as at 31 December 2016

2 700 400
2 510
2 400 350
2 125 318 Volume of loans:
2 100 1 988 289
High 300
EUR billion

EUR billion
1 800
224 Medium 250
1 500 1 409 203 195 189
1 215 Low 200
1 200
138
843 150
900 114
585 89
100
600
47 47 38
300 19 50
17 15 12
- -

Note: Business loans - loans to non-financial corporations.

Source: European Central Bank; KPMG analysis.

2017 KPMG Baltics SIA, a Latvian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG 35
International"), a Swiss entity. All rights reserved.

Document Classification: KPMG Public

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jmasane@kpmg.com jevgenijs@TWINO.eu

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