Private Credit in Emerging Markets
Summary of Note 98 : Private Credit in Emerging Markets. Private credit broadly refers to nonbank lending to firms. Since the Global Financial Crisis of 2008-2009, private credit has grown considerably. Although the phenomenon of private credit is...
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| Language: | English |
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International Finance Corporation, Washington, DC
2021
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| Online Access: | http://documents.worldbank.org/curated/en/433501611302735951/Private-Credit-in-Emerging-Markets http://hdl.handle.net/10986/35053 |
| Summary: | Summary of Note 98 : Private Credit in
Emerging Markets. Private credit broadly refers to nonbank
lending to firms. Since the Global Financial Crisis of
2008-2009, private credit has grown considerably. Although
the phenomenon of private credit is more predominant in the
United States and the United Kingdom, it is also a growing
asset class in emerging markets. Private credit appeals to
borrowers because of bespoke, structured solutions, longer
maturities, greater flexibility, and ease of doing business.
Investors also like private credit, because of its
attractive risk-adjusted returns. The global economic shock
resulting from the Coronavirus (COVID-19) pandemic has seen
marked changes in production and consumption patterns in the
real economy, with ripple effects in credit markets.
Uncertainty and increased risk aversion spiked a rush to top
up liquidity - the so-called ‘dash for cash’ - primarily in
the bank-intermediated credit and public capital markets.
Private credit is an important segment of financial markets,
that has played a strong role in providing access to
financing for underserved segments. With significant amounts
of ‘dry powder’ (capital raised but not yet invested),
private credit has a potentially important role to play in
the post-pandemic recovery as a long-term partner for growth. |
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