Mapping EM private credit: Defining the opportunity

<p><em>From infrastructure and trade finance to sovereign capital and asset-backed lending, the opportunity in emerging market private credit is broad, underpenetrated and increasingly compelling.</em></p><p><br></p><p style="margin-left: 0" data-pasted="true">Global private credit assets under management today total $2.3 trillion and are expected to almost double to $4.5 trillion by 2030.¹ Yet despite emerging markets accounting for roughly half of global GDP,² they represent less than 10% of the global private credit universe.³ Since 2008, only 4% of global private credit fundraising has been directed towards emerging markets.</p><p style="margin-left: 0">There are signs this is beginning to shift. Private credit deployment in emerging markets reached a record $18 billion in the first nine months of 2025, with the first half of the year alone seeing $11.7 billion deployed, almost matching the full-year 2024 total.&nbsp;</p><p style="margin-left: 0"><strong>Figure: EM private credit transactions by geography, 2020 – Q3 2025 (%)</strong></p><p style="margin-left: 0"><strong><img loading="lazy" src="/getContentAsset/dac7b526-99d1-444a-a4a6-878b385f774c/cb87803a-320c-480f-ab75-7b9029eaaf79/EM-private-credit-transactions-by-geography.png?language=en" alt="EM private credit transactions by geography, 2020 – Q3 2025" title="EM private credit transactions by geography, 2020 – Q3 2025" style="width: 100%" class="fr-fic fr-dib"></strong><br></p><p style="margin-left: 0" data-pasted="true">Source: GPCA, Private Credit Outlook 2025, December 2025.&nbsp;</p><p><br></p><h2>The opportunity set: Five pillars of EM private credit</h2><p style="margin-left: 0" data-pasted="true">The diversity of the EM private credit universe is one of its defining features. Unlike developed market direct lending, which has become concentrated around a relatively narrow band of sponsor-backed, middle-market transactions, EM private credit encompasses a range of strategies that can serve different portfolio objectives and risk preferences.</p><p style="margin-left: 0"><strong>Infrastructure&nbsp;</strong>is the most obvious. Africa alone faces an infrastructure financing gap estimated at over $100 billion per year,⁴ spanning power generation and transmission, transport networks, ports, water and sanitation systems and digital infrastructure.&nbsp;</p><p style="margin-left: 0">These assets are typically long-dated, backed by essential services and structured around hard-currency revenues. Importantly, project default rates on African infrastructure are lower than those recorded in Western Europe or North America. This reflects the higher thresholds applied to projects that reach financial close, combined with direct government or state-linked enterprise support.⁵ In many markets, banks face regulatory or capital constraints that limit long-term project lending. Private capital fills that gap, often on terms that would be unavailable in a more competitive environment.</p><p style="margin-left: 0"><strong>Direct corporate lending</strong> addresses the funding needs of businesses across sectors such as telecoms, agriculture, healthcare, manufacturing and financial services. The structural dynamics differ markedly from the US sponsor model: only one-fifth of EM private credit loans are to private equity-backed companies,⁶ leverage is lower and covenant packages are tighter. Yields reflect this. EM private credit deals can generate yields in the mid to high teens, compared with around 10% for US direct lending.³ Lenders can negotiate favourable terms – maintenance covenants, amortising structures, offshore security packages, sole-lender status – that have started to disappear in the crowded US and European middle market.</p><p style="margin-left: 0"><strong>Trade finance</strong> occupies a distinct and underappreciated position within the EM credit universe. This is short-duration, self-liquidating lending: financing the movement of goods, commodities and essential supplies across borders. Pre-export finance, commodity-backed lending, structured receivables facilities and working capital bridge finance are all critical to EM economies dependent on export flows and commodity revenues.&nbsp;</p><p style="margin-left: 0">These assets are largely uncorrelated to public markets, while the short maturities of individual instruments create natural reinvestment optionality and pricing flexibility. With many global banks retreating from frontier trade corridors due to regulatory capital requirements, private lenders can structure bespoke facilities that would otherwise not exist.</p><p style="margin-left: 0"><strong>Sovereign and quasi-sovereign capital solutions</strong> address a structural challenge facing many EM governments. Even where debt-to-GDP ratios remain well below developed market levels, access to international capital markets can be severely constrained, particularly during periods of US dollar liquidity stress. Buyer credit facilities, revenue-backed structures and infrastructure-linked loans – governed by English or New York law and structured around identifiable revenue streams or hard assets – offer sovereigns access to financing for priority imports and capital expenditure while providing investors with established enforcement frameworks. In the right jurisdictions and with repeat borrowers, this segment has demonstrated a strong repayment record across multiple credit cycles.</p><p style="margin-left: 0"><strong>Special situations and flexible capital</strong> represent the final pillar. Across emerging markets, the gap between traditional senior bank lending and equity is wide and typically unfilled. That structural undersupply creates pricing power. Mezzanine debt, preferred equity, hybrid instruments and structured bridge finance targeting the 40–65% loan-to-value range of the capital structure can achieve meaningfully higher returns while retaining the contractual protections enjoyed by creditors. For borrowers trying to complete projects in capital-scarce markets, these solutions are often the difference between execution and severe delays.</p><h2 style="margin-left: 0"><br></h2><h2 style="margin-left: 0"><strong>The time is now</strong></h2><p style="margin-left: 0">Three forces are converging to make this moment compelling for EM private credit.</p><p style="margin-left: 0">The first is saturation in developed markets. Competition in US and European private credit continues to intensify. Spreads between direct lending and broadly syndicated loans have compressed well below historical levels as capital pours in and pricing power shifts to borrowers.⁷ Covenant quality has softened and selective defaults have increased. Investors are increasingly asking whether developed market private credit can continue to offer genuine diversification or whether allocating across a handful of managers fishing in the same pond is, in practice, capital recycling.</p><p style="margin-left: 0">The second is repricing and reallocation. Emerging markets have undergone a significant repricing cycle driven by tighter US dollar liquidity and geopolitical risk, creating entry points that were not as attractive in the lower-rate environment of the previous decade. Many EM economies maintained tighter monetary policy for longer, preserving real rates and strengthening credit fundamentals.&nbsp;</p><p style="margin-left: 0">EM corporates are, on average, less levered than their developed market counterparts: Global Private Capital Association (GPCA) analysis of 153 EM private credit deals shows average leverage of around three times, compared with four to five times in the US.³ Default data challenges the prevailing perception around risk even further. S&amp;P Global shows a 1.1% 12-month trailing speculative-grade default rate in emerging markets, compared with 3.8% in the US and 3.7% in Europe.⁸</p><p style="margin-left: 0">The third is a widening funding gap. According to the International Finance Corporation, the finance gap across emerging markets and developing economies totals $5.7 trillion, equivalent to 19% of GDP.⁹</p><p style="margin-left: 0">Domestic credit to the private sector remains materially lower in many EM economies than in developed markets.^10&nbsp;Multilateral and bilateral lenders cannot bridge the gap alone. Private capital is increasingly required to fill it.</p><p style="margin-left: 0" data-pasted="true"><strong>Figure 2: Domestic credit to private sector (% of GDP)</strong></p><p><img loading="lazy" src="/getContentAsset/77f81d60-7849-478a-99c3-e3ee7ba72d73/cb87803a-320c-480f-ab75-7b9029eaaf79/Domestic-credit-to-private-sector.png?language=en" alt="Domestic credit to private sector" title="Domestic credit to private sector" style="width: 100%" class="fr-fic fr-dib"></p><p style="margin-left: 0" data-pasted="true">Source: World Bank, World Development Indicators. As of end-2024.&nbsp;</p><p style="margin-left: 0"><br></p><h2 style="margin-left: 0" data-pasted="true">The demographic and natural resource dividend</h2><p style="margin-left: 0" data-pasted="true">Emerging markets are not a homogeneous bloc; they encompass some of the world's fastest-growing economies, youngest populations and most significant concentrations of natural resources. These characteristics shape both the opportunity set and the secular tailwinds that support it.</p><p style="margin-left: 0">Emerging markets and developing economies are expected to grow 4.2% in 2026, compared with 1.8% for advanced economies.² This is not a cyclical gap. It reflects structural differences in demographics, urbanisation rates and the stage of economic development. Africa alone is home to more than 1.4 billion people, with the youngest median age of any continent.¹¹ Rapidly expanding middle classes, accelerating urbanisation and rising digital connectivity translate directly into demand for energy, infrastructure, food systems, healthcare and financial services – demand that is already creating real financing opportunities across multiple sectors.</p><p style="margin-left: 0">On natural resources, the picture is equally striking. The energy transition has placed critical minerals such as graphite, cobalt, copper and lithium at the centre of global industrial policy. A substantial share of the world's reserves sits in Sub-Saharan Africa: the Democratic Republic of Congo (DRC) holds an estimated 70% of global cobalt reserves; Tanzania is home to some of the richest high-grade graphite deposits in the world; Zambia and the DRC together account for a significant proportion of global copper output.¹²&nbsp;</p><p style="margin-left: 0">As the world electrifies, the case for financing the development of these resources will only intensify.</p><p style="margin-left: 0">Asia is expected to overtake the US in data centre capacity by the end of the decade,¹³ reflecting digital infrastructure expansion that requires long-dated private capital to fund. Latin America, meanwhile, is home to some of the world's largest reserves of lithium, concentrated in the so-called Lithium Triangle of Argentina, Bolivia and Chile, alongside significant copper, silver and agricultural endowments that underpin export-driven economies with natural hard-currency revenue streams.&nbsp;</p><p><br></p><h2 style="margin-left: 0" data-pasted="true"><strong>Regional nuances within a global opportunity</strong></h2><p style="margin-left: 0" data-pasted="true">Opportunities in EM private credit are best understood region by region.</p><p style="margin-left: 0">Sub-Saharan Africa offers the most acute need. Domestic bank credit to the private sector remains exceptionally low and is further constrained in many countries by the public sector crowding out available lending capacity. The continent's infrastructure needs, demographic growth, natural resource endowment and rapid digitalisation all create specific, financeable opportunities across energy, critical minerals, agriculture, healthcare, telecoms and financial services.</p><p style="margin-left: 0">Asia has accounted for 38% of EM private credit capital deployed since 2021.³ India, and Southeast Asia are the leading recipients, driven by rapid urbanisation, digitalisation and sustained infrastructure build-out. In India alone, transactions have scaled materially, with private credit financing some of the country's largest infrastructure projects.</p><p style="margin-left: 0">Latin America accounts for 45% of disclosed deal activity since 2021. Local investor appetite is robust and growing: in a recent Preqin survey, 58% of Latin American institutional investors identified private credit as the asset class presenting the best opportunities over the next 12 months.³ Countries with limited access to international bond markets generate direct lending opportunities with pricing that reflects the scarcity of alternatives, and natural commodities exposure that aligns with structural themes driving the broader EM investment case.</p><p style="margin-left: 0">Central and Eastern Europe presents a more mature but evolving landscape. Countries with constrained access to corporate bond markets stand out as the most compelling direct lending opportunities. The region has also seen an acceleration of restructuring-related deal flow that creates openings for solutions-oriented lenders.</p><p style="margin-left: 0">The Middle East adds a different dimension. Gulf states with ambitious economic transformation agendas are driving significant demand for project finance and corporate capital across sectors from healthcare to data infrastructure. The growing maturity of regulatory frameworks in the region’s international financial centres has also improved investor confidence in governance and enforcement.</p><p><br></p><p style="margin-left: 0" data-pasted="true"><strong>Diversification and risk: What the data shows</strong></p><p style="margin-left: 0" data-pasted="true">For global investors, emerging market private credit offers a genuinely differentiated set of return drivers. Yield premia of 150–300 basis points relative to developed markets reflect the relative immaturity of these regions rather than proportionally higher risk.¹⁴</p><p style="margin-left: 0" data-pasted="true"><strong>Figure 3: EM private credit metrics vs US</strong></p><table style="width: 100%; margin: auto; height: 195px"><colgroup><col style="width: 33.3333%"></colgroup> <colgroup><col style="width: 33.3333%"></colgroup> <colgroup><col style="width: 33.3333%"></colgroup><tbody><tr style="height: 30px"><td style="text-align: center"><div data-empty="true"><br></div></td><td style="text-align: center"><div data-empty="true">EM (mean)</div></td><td style="text-align: center"><div data-empty="true">US</div></td></tr><tr style="height: 30px"><td style="text-align: left"><div data-empty="true">Weighted average life (years)</div></td><td style="text-align: center"><div data-empty="true">2.5</div></td><td style="text-align: center"><div data-empty="true">4</div></td></tr><tr style="height: 30px"><td style="text-align: left"><div data-empty="true">Yield to maturity</div></td><td style="text-align: center"><div data-empty="true">16.4%</div></td><td style="text-align: center"><div data-empty="true">10%</div></td></tr><tr style="height: 32px"><td style="text-align: left"><div data-empty="true">Leverage</div></td><td style="text-align: center"><div data-empty="true">3.1x</div></td><td style="text-align: center"><div data-empty="true">4-5x</div></td></tr><tr style="height: 42px"><td style="text-align: left"><div data-empty="true">Loan-to-value</div></td><td style="text-align: center"><div data-empty="true">50.7%</div></td><td style="text-align: center"><div data-empty="true">40-50%</div></td></tr><tr style="height: 30px"><td style="text-align: left"><div data-empty="true">Interest coverage ratio</div></td><td style="text-align: center"><div data-empty="true">5.7x</div></td><td style="text-align: center"><div data-empty="true">1.5x</div></td></tr></tbody></table><p style="margin-left: 0" data-pasted="true">Source: GPCA, Private Credit Outlook 2025, December 2025.&nbsp;</p><p style="margin-left: 0" data-pasted="true">Nevertheless, any assessment of emerging market private credit must consider risk. Political volatility, currency movements, governance concerns and enforcement challenges are real. They are also, in many cases, misunderstood and consistently mispriced.</p><p style="margin-left: 0">The most important empirical counter reference point is defaults. Across a dataset of more than 15,000 emerging market loans spanning 1994 to 2023, the average default rate was approximately 3.6% – lower than the 4.0% recorded for Moody's global B3-rated corporate cohort over the same period.¹⁵ The correlation of EM credit cycles to US and European credit cycles is also structurally lower, precisely the diversification benefit global investors are looking for at a time when developed market private credit increasingly exhibits public-market-like behaviour.</p><p style="margin-left: 0">Managing risk in EM does, however, require specific expertise. Focusing on borrowers with natural hard-currency revenues reduces foreign exchange risk. Holding security offshore through established legal jurisdictions significantly improves enforcement predictability. Political risk insurance and multilateral guarantees can be added where appropriate. Lenders who are also sole creditor – a common feature of EM transactions – retain control in periods of stress in ways that syndicated transactions simply do not.</p><p style="margin-left: 0"><br></p><h2 data-pasted="true">In summary</h2><p style="margin-left: 0" data-pasted="true">Although emerging market private credit remains underpenetrated relative to economic output, record deal volumes in 2025 signal growing acceptance.&nbsp;</p><p style="margin-left: 0">The opportunity spans five distinct pillars – infrastructure, direct corporate lending, trade finance, sovereign and quasi-sovereign financial and special situations. While they differ in terms of risk characteristics, tenors and return profiles, they are all available in markets where capital is scarce, lenders retain negotiating power and the assets being financed are essential rather than discretionary.</p><p style="margin-left: 0">Demographics, urbanisation, natural resource endowment and the energy transition provide secular tailwinds. Default data provides the empirical foundation. The growing weight of institutional capital moving in this direction highlights the market signal.</p><p style="margin-left: 0">For investors seeking diversification, attractive yields and exposure to real economic growth rather than financial engineering, emerging market private credit merits serious consideration.&nbsp;</p><p><br></p><p data-pasted="true"><strong>Endnotes</strong></p><ol><li>Preqin, Private Markets in 2030, October 2025.</li><li>IMF, World Economic Outlook Update, January 2026.&nbsp;</li><li>Global Private Capital Association, Private Credit Outlook, December 2025</li><li>African Development Bank, March 2025.&nbsp;</li><li style="margin-left: 0" data-pasted="true">Moody’s Analytics, ‘Infrastructure default and recovery rates, 1983-2022,’ December 12, 2023.</li><li style="margin-left: 0" data-pasted="true">Financial Times, Emerging Market Private Credit Surges to Record $18bn, December 2025.</li><li style="margin-left: 0" data-pasted="true">Lincoln International, Q3 2025 Lincoln Senior Debt Index, November 2025.</li><li style="margin-left: 0" data-pasted="true">S&amp;P Global, Default, Transition and Recovery, February 2026.</li><li style="margin-left: 0" data-pasted="true">International Finance Corporation, MSME Finance Gap, March 2</li><li style="margin-left: 0" data-pasted="true">World Bank, Domestic Credit to Private Sector Database, 2024.</li><li style="margin-left: 0" data-pasted="true">United Nations, World Population Prospects, 2022.</li><li style="margin-left: 0" data-pasted="true">United States Geological Survey, Mineral Commodity Summaries, January 2024.</li><li style="margin-left: 0" data-pasted="true">&nbsp;Addleshaw Goddard LLP, Dispelling Misperceptions Around Emerging Market Private Credit, November 2025.</li><li style="margin-left: 0" data-pasted="true">Reuters, Private Credit Cash Pivots from 'Risky' West to Emerging Markets, October 2025.</li><li style="margin-left: 0" data-pasted="true">Internal Gemcorp analysis of Moody’s, S&amp;P historical default data, as of October 2025.</li></ol><p><br></p><p style="font-size: 12px"><strong>Important Information:</strong></p><p style="font-size: 12px">This content has been prepared solely for informational purposes by Gemcorp (as defined below), is confidential and may not be reproduced.</p><p style="font-size: 12px">This content does not constitute an offer or solicitation of an offer with respect to the purchase or sale of any security and should not be relied upon when evaluating the merits of investing in any securities or form the basis of an investment decision. 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