Small and medium-sized enterprises dominate the business landscape in Italy, accounting for nearly 80% of the industrial and service labour force, and generating about two-thirds of turnover and value added.
Weak cyclical conditions in the second half of the year swiftly affected lending markets: after increasing at a sustained pace throughout 2018, business loans resumed their decline in the first half to 2019. Credit weakened slightly for large firms, but contracted markedly for smaller ones, exacerbating an already sluggish loan dynamics.
Credit standards remained loose overall, but gradually tightened from the second half of 2018, owing to higher funding costs for banks and a gloomier economic outlook. Business borrowing rates stood at historically low levels, but collateral requirements remained stable at a high level compared with the past.
Credit quality continued to improve, partly reflecting the cyclical upswing observed in recent years: the ratio of SME new non-performing loans to outstanding loans fell below the levels observed before the global financial crisis. The stock of non-performing loans dropped further, mainly as a result of large sales.
Equity financing for SMEs rose sharply in 2018 compared to the previous year, driven by an unprecedented growth in the early stage segment; resources devoted to firms of all sizes almost tripled, after plummeting by more than 40% in 2017.
Business-to-business payment delays stabilised overall, but the economic slowdown gradually led to a worsening in payment patterns: both agreed timeframes and average delays in the settlement of invoices increased somewhat for smaller firms.
Bankruptcies fell for the fourth year in a row, down by nearly 7% compared to the previous year and well below the peak observed in 2014.
The wide range of policies enacted or ramped up in response to the financial crisis gradually shifted in recent years from a broad-based countercyclical support to more targeted initiatives aimed at pursuing specific goals.
Credit guarantee schemes traditionally played a crucial role in easing SME access to finance. The Central Guarantee Fund continued to expand its activity, reaching a new high in 2018: it provided EUR 13.7 billion in guarantees for EUR 19.3 billion worth of loans. Its recent reform, aimed at better fitting the need of the potential beneficiaries through the introduction of a new evaluation system of firms’ creditworthiness, came into effect in early 2019.
Long-term individual savings plans (piani individuali di risparmio or PIR) were introduced in early 2017 to channel private savings towards investments in financial instruments issued by Italian companies. In order to foster the development of small and medium-sized enterprises, the 2019 Budget Law amended the rules on PIR funds by requiring them to invest part of the portfolio in financial instruments issued by Italian SMEs and in venture capital funds. However, these investments were relatively risky and characterised by low liquidity, partly owing to the limited size of the markets for securities issued by smaller firms. Since January 2019, net subscriptions virtually dried up following legislative changes.
Initiatives have been recently undertaken to support the development of a more mature innovation ecosystem. The National Innovation Fund, established by the 2019 Budget Law, is slated to become one of the leading European venture capital operators, acquiring qualified minority stakes in start-ups, scale-ups and innovative SMEs, while acting as a catalyst for private and international capital.
