This is a brand new area I am now working on. I define alternative finance as any kind of finance that does not involve a formal financial intermediary (i.e. regulated banks and capital markets). This is a relatively new but very fast growing area. At Cambridge, I co-founded a centre for alternative finance. The Centre is an international interdisciplinary academic research institute. Examples of alternative channels are online 'marketplaces' such as equity- and reward-based crowdfunding, peer-to-peer consumer/business lending, and third-party payment platforms. Alternative instruments include SME mini-bonds, private placements and other 'shadow banking' mechanisms, social impact bonds and community shares used by non-profit enterprises, and alternative currencies such as Bitcoin.

Law, Trust, and the Development of Crowdfunding

In this paper, I document the global patterns of crowdfunding, an innovative form of financing that has grown faster than any other financial innovation in the recent past. Using a unique hand-collected sample of crowdfunding volume obtained by surveying over 1,300 crowdfunding platforms worldwide, I also analyze the global determinants of crowdfunding. Crowdfunding is a developed market phenomenon that largely involves fixed income instruments sold to investors driven by financial motives. Emerging markets do not display large crowdfunding volumes. Crowdfunding volume within a country appears to be driven by rational economic reasons. Barriers to entry and potential financial depth matters in determining the volume of crowdfunding, but the financial profitability of extant intermediaries and the extant financial depth of the market do not matter.  It is still a working paper and is downloadable here.