Tertiary levels 5 and 6 Estonia 2017 OECD economic survey overview

ASSESSMENT AND RECOMMENDATIONS OECD ECONOMIC SURVEYS: ESTONIA © OECD 2017 45 As proposed in the 2015 Economic Survey, the financial industry could be diversified by granting banking licences to savings and loans associations Table 7. Efforts to develop venture capital, including the creation of a fund of funds are welcome. Another avenue is to remove barriers to the development of alternative funding modes, such as peer-to-peer lending and equity-based crowdfunding i.e. Fintech. Estonia is a host to some of the most innovative Fintech start-ups and a frontrunner in alternative finance, but the scale of finance channelled remains limited Figure 29. Establishing conditions for the development of Fintech could increase credit supply for risky projects and offer new business opportunities to Estonian ICT companies. To do so, a level playing field should be established between traditional and alternative sources of credit in terms of access to information, regulation and taxation. Consumer protection of Fintech users is weak and should be reinforced to build confidence in these new funding alternatives. Licencing and transparency requirements for Fintech platforms should be introduced. The platforms should be required to have resolution plans in place to ensure that repayments continue to be collected in case of bankruptcy. Furthermore, the taxation of investment via Fintech platforms should be harmonised with the taxation of bond and equity securities by allowing investors to deduct their losses from their income tax base. Building high-quality infrastructure High-quality infrastructure is a key factor underpinning the success of firms, in particular those operating in international markets. Infrastructure in Estonia has been upgraded significantly over recent years, benefiting from large amounts of public investment. The World Economic Forum Global Competitiveness Index shows that the quality of infrastructure is now perceived as higher than in other CEE countries Figure 30. Figure 29. Estonia is a frontrunner in alternative finance but amounts are low Volumes, in euros per capita, 2015 Note: Alternative finance includes peer-to-peer lending, equity crowdfunding, donation and reward crowdfunding, as well as balance sheet lending. Source: Cambridge Centre for Alternative Finance. 1 2 http:dx.doi.org10.1787888933582075 10 20 30 40 50 60 70 80 90 100 110 120 10 20 30 40 50 60 70 80 90 100 110 120 AU T LT U ES P SW E CH E IS L DE U BE L CH L JP N DN K FR A CA N NL D LV A FI N AU S ES T NZ L G BR US A