As banks retrench, private lenders are stepping in to fund Asia’s growth. Investors say the shift marks a structural change in regional financing—not just another cycle.
Private credit’s rapid rise across Asia is being seen less as a passing trend and more as a secular transformation in how companies access capital. That was the consensus amongst speakers and guests at the recent IDEAs: Alternatives in Focus – Financing Beyond Banks in India & Southeast Asia event, hosted by Lighthouse Canton in Singapore on the sidelines of SuperReturn Asia 2025.
“Asia itself is not a homogeneous market,” said Zongwen Tan, Member of Management, Private Credit Asia at Partners Group. “It tends to be sub-region by sub-region.”
He added, “There is room for acceleration, but it’s very nuanced.”
Tan pointed to corporate M&A and PE-sponsored financings as a case in point. “Corporate M&A and PE-sponsored activity has been on the rise, and that naturally creates a need for a different sort of capital,” he said. “A sponsor wishing to take private a company may require responsiveness and flexibility from alternative sources of capital such as private credit funds.”
That speed and flexibility, panellists noted, are helping private credit fill gaps left by risk-averse lenders. The asset class has grown swiftly in the region where Asia-Pacific-focused private debt AUM was USD99.3 billion as of the end of 2023 (according to Preqin data cited in an October 2024 report). This figure grew from $58.2 billion in 2020, representing a growth of over 70% in that three-year period.
Growth is strongest in India, Japan and Southeast Asia—markets where banks’ appetite for mid-market and structured lending remains limited.
When asked whether this wave represents a “secular” shift or just “this time it’s different.” Tan was firm: “It’s driven by strong fundamentals.”
DIRECT LENDING EMERGES AS BANKS STEP BACK
For Sanket Sinha, Managing Director and CEO of Global Asset Management at Lighthouse Canton, private credit’s expansion is rooted in practicality.
“Lending directly to corporates has existed for years,” he said. “It’s called direct lending in North America and here, you call it performing credit.”
He explained that private lenders are gaining market share because of “execution speed and the limits they can offer borrowers.” Beyond conventional lending, private credit is stepping into specialised segments—real estate, acquisition financing and non-traditional working capital—where banks hesitate. “Growth debt, for example, is something banks are not able to support,” Sinha said.
That gap has opened space for a new breed of credit providers and structures. Pranob Gupta, Managing Director and Business Head of Credit & Hybrid Alternatives at Lighthouse Canton, said private credit is increasingly supporting sponsor and promoter financing in Asia.
“Private credit helps sponsors or promoters consolidate their stakes and provide successful and timely exits to existing investors on the cap table,” Gupta explained.
Gupta noted that this trend is especially visible in India, where capital markets have been buoyant and equity activity strong. “We have many such successful case studies and live situations,” he said, “making this a pretty interesting theme in Asian markets—specifically India—where the capital markets are doing phenomenally well.”
Continuing with India, Ankit Agrawal, Executive Director and Head of Growth Debt at Lighthouse Canton added that credit penetration among companies is still very low. “We feel this asset class has been approaching maturity in India.”
He acknowledged that growth debt “may sound risky, but it’s not,” emphasising that “a lot of science goes behind underwriting those companies.” Agrawal added, “Our asset house has seen no default ratios for the last 10 years, which includes Covid and various macroeconomic shocks.”
A WIDENING INVESTOR BASE
The appeal of private credit isn’t limited to borrowers—it’s also attracting institutional allocators seeking flexible, yield-generating strategies. Kijung Kwon, Managing Director and CEO of NH Absolute Return Partners, highlighted that mid-sized companies across Asia increasingly depend on non-bank financing.
“It’s where private credit steps in,” he said, “offering flexible solutions while generating attractive risk-adjusted returns for investors.”
According to Kwon, markets such as India, Indonesia and Thailand present compelling opportunities precisely because of their financial structures. “The common aspect is that they don’t have mega banks, and the lending business system is thinner,” he said.
That dynamic, he explained, creates both a need for private lenders and an opportunity for investors. “From an institutional perspective, India also offers diversification,” he said. “It’s demographically young, consumption-driven, and reforms have steadily improved governance and transparency.”
For allocators like NH Absolute Return Partners, Kwon added, “India provides both yield and growth—which is rare to find together.”
REPLACING OR COMPLEMENTING BONDS
Despite its momentum, speakers agreed that private credit won’t supplant traditional bond markets.
“Private credit exists because it’s an easy asset class in a world where interest rates are low and falling,” Sinha said. “Investors—insurance companies, pension funds, sovereign wealth funds, and now family offices—seek yield.”
Tan concurred: “I don’t think private credit will ever completely replace bonds. It’s a space that’s complementary.” He added that private strategies “supplement your returns and diversify the portfolio.”
That diversification is proving attractive as allocators rebalance portfolios in a higher-for-longer rate environment.
The discussion concluded on a convivial note, as guests continued to exchange views over a tasting of premium, award-winning whiskies—closing an evening that blended market insight with the optimism surrounding Asia’s evolving private markets landscape.
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