Private debt is on the rise globally, but still nascent in Thailand
Globally, private debt is on the rise—and this has been the case since at least the 2008 global financial crisis, when regulators clamped down on banks and opened the doors for alternative lenders to fill the financing gaps. This asset class grew 13.5% year-on-year over the past decade, reaching ~USD 1.2tn at the end of 2021, with projections to reach USD 2.7tn by 2026.1
Private debt first emerged as a new frontier for credit investors in the US and Europe, but has since gained popularity in Asia, with its burgeoning middle class, and where changing consumption patterns accelerate the development of micro, small and medium sized enterprises.2 Although private debt in Asia is often perceived to focus on distressed opportunities, particularly after the 1997 financial crisis, there has been increased attention on the use of private debt to fuel corporate and economic growth.
Private debt provides unique solutions for both borrowers and investors alike:
• Advantages for borrowers include bespoke lending terms (e.g., payment in kind, mezzanine options, etc.) that suit various businesses needs, longer time horizons (e.g., 3-5 years), closer relationships between the borrower and their lender, faster capital deployment, and more flexible credit / underwriting requirements compared with banks.
• Advantages for investors include portfolio diversification (both geographically and by asset class), higher risk-adjusted returns in exchange for liquidity lockup (known as the “illiquidity premium”), and more predictability in returns and less price volatility compared with other public market investments.
In Thailand, private debt is relatively nascent compared with other major markets in Asia, not to mention the US and Europe. While the commercial lending landscape in Thailand has been dominated by banks, the micro and SME financing gap remains high at USD 40bn.3 Private debt can be viewed as a viable alternative funding vehicle that can supplement traditional bank lending and help fill this financing gap.
In our report, we show that there is potential for Thailand to build out a multi billion-dollar private debt market that could help fill the financing needs of local under-banked and/or under-served micro, small and medium enterprises, as well as larger corporates.
Introduction: In this section, we share our definition of private debt (i.e., debt financed by non-banks in private markets) as well as our report focus areas. For the purposes of this report, we will focus on private debt assets that are offered by investment managers (private debt funds) operating under a General Partner (GP) / Limited Partner (LP) structure. These GPs typically raise capital from LPs, such as institutional investors and high net worth individuals, and on-lend that capital to a portfolio of corporate borrowers.
Chapter 1 Overview of market landscape: This chapters presents an overview of key stakeholders in the private debt ecosystem; macro and stakeholder trends that affect private debt supply and demand; and the potential for private debt in Thailand.
• The 2008 financial crisis led regulators to clamp down on bank activities, opening the door for private debt lenders.
• Interest rate dynamics have affected private debt investments in mixed ways. Many investors in search of higher yield turned to private debt opportunities vis-à-vis traditional asset classes that yielded lower returns following the global financial crisis of 2008. Notwithstanding, investors continue to invest in private debt in today’s rising rate environment—as it provides stability versus some more volatile public market investments.
• Borrowers are looking for loans with more flexible lending terms (e.g., longer tenor term loans, mezzanine options, alternative collateral, etc.) to accommodate their unique financing needs.
• Micro & SMEs, as well as mid-sized and larger corporates, have a number of unmet financing needs, thus providing opportunities for private debt in its various forms. Digital lending platforms can help fill the financing needs of smaller companies (e.g., loans up to USD 25mm), whereas larger international funds can support leveraged buyouts and other large corporate financing needs (loans of USD 50mm and higher). This leaves the financing needs of middle-sized enterprises largely unmet (e.g., loans of USD 10-50mm)—an area that local private debt funds can potentially come in and capture.
Chapter 2 Learnings from abroad: We pulled together lessons learned from the world’s leading private debt markets (the US, UK), as well as regional leaders (France, Singapore), and emerging markets (India). Our analysis looked at the private debt landscape in each country, their corporate financing needs, which institutional investors participated in the asset class, and government programs to support private debt.
Singapore, for example, announced its intent to “develop private credit to complement private equity and venture capital funding” as part of its Financial Services Industry Transformation Map 2025.4 The move may help promote Singapore as a regional centre for private debt, and thus attracting available investments into the country vis-à-vis other markets.
Chapter 3 Identifying stakeholder needs and challenges in Thailand based on stakeholder interviews and secondary research:
• Regulatory barriers limiting the scale up of private debt in Thailand: Today, there are no clear regulatory schemes for Thai investment entrepreneurs who want to start their own private debt fund, raise money from qualified investors, and lend directly to corporates. Additionally, Thai investors often do not have a clear pathway to invest in the asset class (whether offshore or onshore); certain types of institutional investors, for example, are not allowed to allocate money into private debt. Finally, lenders in Thailand must navigate a debt enforcement regime that is burdensome to them—with default cases often being stuck in court for years, without definite timeframes; this deters many lenders from participating in the market
• Market and stakeholder readiness: In Thailand, there is a mismatch in terms of private debt supply and demand. International private debt funds often overlook Thailand, as they believe the country lacks both the larger deal sizes they are looking for and the returns needed to compensate for country risk and currency risk. At the same time, many Thai corporates and SMEs struggle to find alternative lenders that can offer them smaller and mid-sized loans. Additionally, many Thai investors and regulators are not yet aware of the private debt asset class and its role in a diversified portfolio.
From a human capital perspective, there are a limited number of Thai professionals with private debt experience needed to start up onshore funds. International practitioners may also be dissuaded from entering Thailand (and initiating skills transfers) due to potential language barriers (e.g., in conducting due diligence and in navigating Thai laws).
• Information asymmetry: Alternative lenders in Thailand have limited access to the data of SMEs and unlisted companies, and often struggle to assess the credit worthiness of these companies. Private debt is perceived as a risky investment as a result—particularly to those unfamiliar with the asset class.
Chapter 4 Addressing challenges through regulations & infrastructure by introducing potential initiatives, drawn largely from key learnings identified in chapter 2:
• Regulatory initiatives: These include initiatives to 1) enable Thai investment professionals to register their private debt vehicle, raise money from investors, and lend to local corporates, 2) broaden the eligibility criteria so more investors (particularly institutional investors) can invest in both offshore and onshore private debt funds, and 3) improve debt enforcement in Thailand to encourage alternative lenders (e.g., by introducing borrower deadlines for debt resolution cases, empowering arbitrators or specialized courts, improving the database of debtors’ assets and financial positions, etc.).
• Infrastructure initiatives: These include initiatives to 1) establish a secondary market to provide flexibility and enable private debt investors to exit their long-term loans, 2) launch a co-funding scheme so that the government can invest alongside private sector LPs in private debt funds, and 3) make it easier to both invest in and borrow from private debt funds across ASEAN.
Disclaimer: This report is for informational purposes only and should not be used as investment, tax, legal, or business advice
Read more : Private debt feasibility study: Opportunities for the Thai capital market | Deloitte SEA | Consulting | Perspectives