Returns to Private Debt in Emerging and Developing Economies

Private debt is an important form of corporate financing in emerging markets, but its investor returns are not well understood. This paper uses loan-level cash flow data from the International Finance Corporation to provide the first systematic evidence on realized returns across 4,109 loans over more than 20 years, totaling about US$115 billion in 127 countries. Post–global financial crisis loans outperform both the JPMorgan Corporate Emerging Market Bond Index and U.S. Treasuries, with public market equivalents of 1.02 and 1.10, respectively, rising to 1.05 and 1.14 over the latest five years. Over 2002–24, the corresponding public market equivalents are 0.98 and 1.07, respectively, with global financial crisis–era vintages posting weaker performance relative to the JPMorgan Corporate Emerging Market Bond Index. Overall, returns are competitive with public markets. The paper also assesses financial performance more specifically within the most challenging markets: very low-income countries and fragile and conflict-affected states. Although default rates are higher in these markets, returns relative to public-market alternatives are statistically indistinguishable from those of the overall portfolio, suggesting that the International Finance Corporation priced default risk appropriately even in these markets.