Private equity firms are Asia's new bankers
Data from Private Equity International and Thomson Reuters revealed that private equity companies are now Asia's new bankers. So far, twelve private equity funds have put up USD 6.6 billion in Asian investments. As traditional banks retreat from buyout deals and tighten the credit noose on small businesses, private equity firms are filling the void. Companies like KKR, Apollo Global Management, and Olympus Digital are doing business in the region in a bid to raise credit funds.
A high-risk strategy that global private equity firms are studying involves providing high-interest loans to small and medium-sized businesses in China that are starved for cash. The 4.3 million small and medium enterprises there comprised 60% of the country's gross domestic product and provided 75% of its new jobs, but rely heavily on the shadow banking system for funds. The shadow banking market in the mainland where cash-strapped firms go to for capital is composed of pawn shops, trust companies, and credit guarantee companies.