Amid growing economy, private credit market to grow in Asia-Pacific region: Moody's

New Delhi: Private credit markets in the Asia Pacific region have grown rapidly over the past decade and it will continue to expand, driven by niche demand amid growing economies, said Moody's Ratings.

That said, continued dominance of banks in lending in the region means private credit markets are still small.
The global rating agency asserted that the private credit sector in Asia-Pacific will continue to expand, led by large economies, as robust economic growth boosts overall financing needs.

In addition, Moody's Ratings noted that Asia-Pacific investors are also interested in the global private credit market and will continue to allocate their investments into US and Europe

Current Market Size and Growth:
Private credit assets under management (AUM) earmarked for lending to Asia-Pacific companies have roughly doubled to about USD 120 billion at the end of 2023 from four years earlier.

Despite this rapid growth, private credit markets in Asia-Pacific remain relatively small, accounting for just 6-7 per cent of total transactions globally over the past decade.

India's private credit market will continue to grow strongly, driven by financing demand from the real estate, infrastructure, and manufacturing sectors, as well as from companies that are not yet listed or in growth stages, it said.

"Private credit will continue to draw demand from middle-market companies, helping to fill their funding gaps. It can also be a valuable financing option for projects such as infrastructure development and leveraged buyouts (LBOs)," Moody's Ratings said.

"Long-term institutional investors with higher risk appetites are the main investors in private credit in Asia-Pacific."
Large developed economies, such as Australia, Japan and Korea have more sophisticated financial and legal systems, and larger investor pools.

In some large developing economies including China and India, demand for private credit will be mainly driven by economic growth and improvements in regulatory and legal systems, Moody's Ratings asserted.