The author, Michel Lowy, is co-founder and CEO of SC Lowy
Private credit in the Asia-Pacific (APAC) region is approaching a period of structural expansion that reflects deeper changes in the region’s financial landscape.
While private credit in the US and Europe continues to operate within mature and well-defined ecosystems, APAC is evolving along a different trajectory, shaped by fragmentation, rising financing needs in capital-intensive sectors, and a steady reallocation of global and regional capital.
These developments will define the opportunity set in 2026 and are laying the foundation for a more embedded and durable private credit market across the region.
Faster growth, more fragmentation
APAC is expected to deliver the fastest rate of private credit growth globally in 2026, and growth is increasingly being distributed across a wider set of economies.
What was once concentrated in Australia, Japan, and India is now extending into South Korea, Malaysia, Thailand and several Southeast Asian markets, each with distinct legal systems, regulatory frameworks and creditor protections. As a result, underwriting and enforcement require local expertise and a nuanced understanding of market-specific risk.
APAC is expected to deliver the fastest rate of private credit growth globally in 2026
At the same time, the investor base within the region is expanding. Private banks, family offices and semi-liquid vehicles are increasing allocations to private credit, contributing to a more diversified, and increasingly local, capital pool.
As these channels mature, APAC’s development path is diverging meaningfully from the Western market model. Unlike the US and Europe, where private credit has evolved into a scaled, sponsor-dominated extension of the leveraged finance ecosystem, APAC remains characterised by relationship-driven, bespoke capital solutions, a lower prevalence of sponsor-backed leverage, and regulatory frameworks that discourage balance-sheet maximisation.
In this environment, the importance of deep regional networks and rigorous, on-the-ground due diligence is reinforced, as access information asymmetry, and local credibility remain critical differentiators.
The most attractive opportunities, therefore, arise where managers combine geographic proximity with situational insight to structure tailored solutions that address discrete financing needs.
Core drivers: real assets, digital infra, energy transition
Borrowing needs across APAC remain elevated, particularly in sectors requiring long-term investment and flexible capital solutions. Banks continue to retrench from many capital-intensive areas in response to regulatory pressures and the need to preserve balance sheet capacity. This environment is supporting persistent demand for private credit across a growing set of industries.
Real estate remains a central driver, particularly in Australia, South Korea, India, Hong Kong and Southeast Asia. Refinancing deadlines, regulatory adjustments and constrained bank lending are sustaining the need for development finance, bridge facilities and transitional capital. Logistics assets, residential projects and mixed-use developments are expected to generate significant activity throughout 2026.
Digital infrastructure is contributing to a similarly robust pipeline. The expansion of data centres, fulfilment networks and telecom assets requires long-duration capital that often exceeds bank appetite. Private lenders are well-positioned to provide tailored structures for projects with phased development schedules, contracted revenue profiles or cross-border elements. These trends reflect the continued digitalisation of economies across Southeast Asia, India and North Asia.
The expansion of data centres, fulfilment networks and telecom assets requires long-duration capital that often exceeds bank appetite.
The energy transition remains a multi-year catalyst for private capital demand. Governments’ decarbonisation goals are advancing more quickly than bank lending capacity in the region, creating opportunities across renewables, storage, grid upgrades and distributed energy platforms.
Additional activity in healthcare, pharmaceuticals and parts of the industrial and manufacturing sectors in South Korea, India and ASEAN markets will further contribute to a diversified opportunity set.
Growing capital inflows and institutionalisation
Global allocations to APAC private credit are expected to rise steadily as investors seek higher yields, diversification and exposure to less correlated return streams.
Improved familiarity with the region, coupled with the emergence of more established managers, is reducing perceived barriers to entry. Meanwhile, slower exits and lower distributions in Western credit funds are prompting allocators to reconsider the geographic balance of their portfolios.
Slower exits and lower distributions in Western credit funds are prompting allocators to reconsider the geographic balance of their portfolios
Despite this momentum, APAC remains materially under-allocated relative to its economic scale and lending requirements. This imbalance continues to support stronger spreads, lender-friendly terms and a high prevalence of bilateral negotiations. These features are likely to persist in the near-to-medium term, reinforcing the appeal of senior secured, first-lien strategies for managers seeking durable risk-adjusted returns.
Regional capital is also becoming a more influential driver of market development. Sovereign wealth funds, pension schemes, insurers and family offices across the region are increasing commitments to APAC private credit. Their growing participation is deepening liquidity, supporting co-investment activity and reducing reliance on Western inflows. This trend represents a meaningful step in the long-term institutionalisation of the asset class.
Sovereign wealth funds, pension schemes, insurers and family offices across the region are increasing commitments to APAC private credit.
What’s on the horizon
As we move into 2026, private credit is becoming increasingly embedded within the APAC region’s financial ecosystem.
Banks, capital markets and private lenders are operating in a more complementary and interconnected manner, as selective bank retrenchment, improved governance standards, and rising institutional participation reshape corporate financing.
Ongoing enhancements to regulatory and legal frameworks across several key markets, together with the continued development of secondary markets and broader sector coverage, are accelerating the maturation of the asset class and expanding the addressable opportunity set.
Against this backdrop, APAC’s structural financing needs, driven by corporate expansion, balance sheet optimisation, succession planning, and episodic dislocations, are generating a durable pipeline of private credit opportunities that are less correlated with Western credit cycles.
For investors, the region offers the potential for differentiated return profiles, attractive risk-adjusted yields, and portfolio diversification benefits derived from heterogeneous economies, varied regulatory regimes and localised market dynamics.
For managers with deep regional presence, extensive on-the-ground networks, and a disciplined approach to underwriting and structuring, 2026 represents not only a compelling growth opportunity but also the ability to deliver consistent, downside-protected returns in a market where situational insight and local execution remain decisive advantages.
