Dr. Metinee Jongsaliswang | Thailand Country Consulting Leader | Deloitte Consulting
Private debt investments have grown rapidly in the US and Europe over the past decade and have also gained popularity in Asia. The asset class has helped to provide alternative lending solutions for companies, as well as portfolio diversification solutions for investors. But private debt is still nascent in Thailand, despite its potential to grow into a multi-billion dollar industry.
Private debt, defined as debt financed by non-banks in private markets, comes in various forms. These include:
While the latter two forms of private debt exist in Thailand, the former (i.e., private debt in the GP/LP structure) is very much limited. These types of deals are unique in the marketplace, as they typically feature close, long-term relationships between the lender and the borrower.
For commercial borrowers, private debt GPs can offer more flexible, more bespoke lending solutions (e.g., payment in kind, mezzanine options, etc.) that suit various business needs, longer time horizons, faster capital deployment, and more flexible credit / underwriting requirements compared with bank loans.
For investors, advantages of including private debt in your portfolio include diversification benefits (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 compared with many public market investments.
In Thailand, the lending landscape is mostly dominated by banks. While alternative lenders exist, they are not yet able to completely fulfill the financing gaps of Thai businesses. The International Finance Corporation, for example, estimates that there is a USD 40 billion funding gap for Thai micro, small and medium-sized enterprises.
Today, digital lending platforms in Thailand tend to offer smaller sized loans tailored to smaller enterprises. Meanwhile, a few international private debt GPs also have activities in Thailand, albeit focusing on larger deals to larger corporates. What’s largely missing are the domestic and international private debt GPs that can provide loans to middle-market companies (e.g., loans in the USD 20-50 million range).
Private debt is a new concept in Thailand for many regulators, institutional investors, and even commercial borrowers. Key challenges for establishing the nascent private debt ecosystem include regulatory challenges limiting its scale-up, as well as lack of stakeholder readiness. There is currently no clear regulatory scheme that empowers Thai investment entrepreneurs to start their own private debt fund, raise money from qualified investors, and lend directly to corporates—like there are in other countries (such as in Singapore, the US, Europe, and elsewhere).
Additionally, many international debt funds are wary of setting up shop in Thailand due to perceived debt enforcement challenges: They fear that default cases may get stuck in court for years, without definite timeframes.
On the investment side, many institutional investors do not yet have a green light from their respective regulators to invest in the asset class, whether onshore or offshore.
Many economies around the world have included private debt development as part of their strategic initiatives—to advance their respective financial markets.
In Singapore, for example, the central bank recently launched its Financial Services Industry Transformation Map (ITM) 2025—in order to partner with the financial industry to deepen capabilities in strategic asset classes. A key goal of the ITM is to “develop private credit to complement private equity and venture capital funding”.
In France, the government liberalized its banking monopoly in 2016, opening the way for more alternative lenders to come in under different schemes and participate in the market. Capital raised by private debt funds in France have subsequently increased from €1.2 billion to in 2016 to €7.6 billion in 2020.
In the US, retirement funds are increasingly allocating capital to private debt. As the population continues to age and more Americans retire, many pension funds are struggling to balance their assets and liabilities—and have turned to private debt to try and achieve higher risk-adjusted returns.
Though the Thai context may differ from these other countries, it’s worth considering how neighbors and counterparts abroad are utilizing the private debt asset class to advance their respective financial markets and help provide financing solutions for domestic stakeholders.
Please read our report, “Private debt feasibility study: Opportunities for the Thai capital market”, for more insights into the private debt landscape.