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Alternative finance: a historical perspective

Published online by Cambridge University Press:  16 July 2019

David Chambers ,
Rasheed Saleuddin  and
Craig Mcmahon
David Chambers*
Affiliation:
Judge Business School, Cambridge University
Rasheed Saleuddin*
Affiliation:
Judge Business School, Cambridge University
Craig Mcmahon*
Affiliation:
Villanova School of Business, Villanova University
*
Dr David Chambers, Cambridge CB2 1AG; email: adc53@cam.ac.uk.
Craig McMahon, email: craig.mcmahon@villanova.edu.
Rasheed Saleudddin, email: rks66@me.com.
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Abstract

Innovations in the world of alternative finance such as online consumer lending, fund-raising platforms and cryptocurrencies are proceeding apace. In this article, we examine three historical case studies of newly emerged non-bank financial markets and discuss the possible implications for today's alternative finance markets. The first insight is that the private sector can generally be counted on to meet previously unmet needs. Moneylenders filled a gap unaddressed by the banking system of the day. Junior market IPOs provided access to funds for smaller companies that might otherwise have struggled to raise external finance. Private currencies replaced sovereign coins in transactions at various points in history. The second insight, however, is that new financial markets and instruments eventually attract the attention of regulators. Finally, these examples are a warning to industry not to take for granted that an initially laissez-faire regulatory regime precludes a stronger response at some point in the future. In all three cases, tougher regulation – in some cases even to the point of shutting down the products and markets concerned – arrived after long periods of observation and deliberation by the state.

Keywords

alternative financefinancial innovationIPOsmoneylendingprivate currency

JEL classification

N24: Europe: 1913– N40: General, International, or Comparative N20: General, International, or Comparative N23: Europe: Pre-1913
Type
The past mirror: notes, surveys, debates
Information
Financial History Review , Volume 26 , Issue 2 , August 2019 , pp. 109 - 126
Copyright
Copyright © European Association for Banking and Financial History e.V. 2019 

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Footnotes

We are grateful for suggestions from Raghu Rau, Carsten Burhop, Duncan Needham, Alain Naef, Seung Woo Kim, one anonymous referee and participants at the 2017 Economic and Business History Society annual conference, 2017 Association of Business Historians annual conference and seminars at the University of Cambridge.

References

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