Private credit can help narrow Asia’s SME funding gap

PRIVATE lending has a history as long as money itself but private credit as an asset class, unlike private equity, seems to have burst onto the Asia funding scene relatively recently.

The reality is more nuanced. While private credit has been around in the US for several decades, it emerged on the scene in Europe after the 2008 financial crisis when rules were introduced that increased bank’s lending costs. Put simply, in order to meet regulatory capital requirements, banks pulled back from funding certain segments of the market.

In the current funding environment, and with similar dynamics now at play in Asia, private credit has the potential to perform a much-needed role in providing the capital that Asian companies need to fund growth.