Private credit markets have risen significantly in recent years. In Asia, the winds remain set fair for rapid growth, a report says.

The Asia-Pacific private credit market is projected to grow from $59 billion in 2024 to $92 billion by 2027, according to a new report from the Alternative Investment Management Association. 

But while growth is expected to be strong, the market is fragmented among more than 50 jurisdictions, the report said. 

The market is predominantly without sponsors: 90 per cent of deals involve borrowers without private equity backing who are focused on underbanked small and medium sized and mid-market opportunities.

The report says the region’s expanding middle class, urbanisation and infrastructure gap – estimated at $26 trillion through 2030 – represent “enormous” potential for private credit deployment. 

Australia, India, Japan, and Singapore are leading the region’s growth.

“The APAC private credit market stands out for its uniqueness and appeal, boasting a robust 16 per cent compound annual growth rate as assets under management grow from $59 billion in 2020 to $92 billion by 2027, fuelled by abundant opportunities in the region’s highly fragmented markets,” Ivan Au, wealth and asset management partner at Ernst & Young, said. “The key to unlocking and harnessing this potential is a strategic fusion of global institutional best practices with profound local regional expertise.”

AIMA issued the study via its private credit affiliate, the Alternative Credit Council (ACC), co-authored with Simmons & Simmons, EY, and Broadridge.

The rise of private credit has been a major feature of financial markets in recent years, driven by developments such as the clampdown on conventional bank lending as regulations came into force after the 2008 financial crash, and by a hunt for yield as interest rates were pushed to zero – or even negative rates – in the decade after the crisis. However, there have been recent concerns, particularly as rates have normalised. The International Monetary Fund recently sounded a note of alarm about the sector, sometimes dubbed as "shadow banking."