As a general rule, Portuguese law imposes strict legal restrictions on lending carried out on a professional basis, which is reserved to banks and other specific financial institutions duly registered for that purpose with the Bank of Portugal. The same type of restrictions apply to the acquisition of performing loans.


This framework resulted in the Portuguese economy being almost exclusively dependent on the heavily regulated and capital-hungry banking system, as well as a certain prejudice against financing transactions originating from the non-banking world, commonly known as 'shadow banking'.

With the goal of trying to provide the market with alternative forms of lending outside the banking sector, particularly in this time of crisis we are now facing, the Portuguese Government and the Portuguese Securities Market and Exchange Commission (Comissão do Mercado de Valores Mobiliários or CMVM) have published, respectively, Decree-Law 144/2019 of 23 September establishing the legal framework for the creation of 'loan funds' (which are specialised alternative investment undertakings for loans, commonly known as 'loan funds') and CMVM Regulation 5/2020 of 27 April establishing the rules according to which loan funds may grant loans. These rules on loan funds have entered into full effect with the enactment of the Regulation.


Loan funds are a specific type of alternative investment fund regulated in the Portuguese Legal Framework of Venture Capital Funds and Companies which aim to improve financing in the economy both directly by granting loans to companies, and indirectly through the acquisition of either performing or non-performing loans. They allow market loopholes to be closed in relation to the demand and supply of financing and strengthen the relationship between the banking, and venture capital and securitisation, sectors while offering greater legal certainty at the same time.

Loan funds, which are intended to be marketed solely to qualified investors, can be self-managed or managed by third parties (heterogeneous). If they are self-managed, they can be set up in a corporate form (loan companies) or in a contractual form (loan funds). If they are heterogeneous, their management may be carried out by management companies authorised to manage UCITS and/or alternative investment funds (AIFs), pursuant to the UCITS Directive and the AIFMD respectively, as has been implemented in Portugal, or management companies of venture capital funds. Although these entities must be registered with the CMVM, the applicable regulatory and diversification requirements to which they are subject are less burdensome than those applicable to the 'traditional' financial institutions.

Cross-border activities

Although it is not crystal clear, we believe there are grounds to argue that a loan fund duly established in another EU member state is allowed to grant loans in Portugal, taking into consideration the exemption for loan funds now introduced into the Portuguese Banking Act. Ultimately, AIF managers incorporated in other member states should be able to pursue their activities in Portugal under the passporting rules established in the AIFMD.

Potential impact

The establishment of loan funds represents an important stepping stone, addressing the desire and needs expressed by most market agents given the regulated nature of professional lending activities in Portugal. Time will tell if this new mechanism contributes effectively to the very much needed diversification of the financing solutions available to the Portuguese market and domestic economy.