Part 1 of this series established the conceptual architecture of private credit: a two-sided market in which sophisticated, mandate-driven capital providers (upstream) lend directly to high-yield, fundamentally sound businesses (downstream) outside of the traditional banking system. We also identified Malaysia’s structural tailwind: a large Micro, Small and Medium Enterprises (“MSME”) ecosystem that remains chronically underserved by traditional bank lending.
As we await the specific private credit framework promised by the Capital Market Masterplan 2026-2030 (CMP4), market participants must first grapple with a fundamental question: what actually qualifies as “private credit” in Malaysia? Without a clear definition, the risk of Jamie Dimon’s “cockroach” problem (where hidden defaults emerge from the shadows of unregulated lending) becomes much more acute. This article, Part 2 of our series, examines the fragmented landscape of Malaysia’s version of private credit and seeks to define the perimeter by distinguishing it from other common forms of credit.
What Counts as Private Credit in Malaysia?
Information on the private credit scene in Malaysia is scarce as, unlike for regulated investment activities, the Securities Commission of Malaysia (“SC”) currently does not maintain a list of “private credit funds” or the managers of such funds.
Based on reports[1], there are at least 14 funds in Malaysia which can be classified as private credit funds, most of which were launched in the past three years. The largest amongst them is the Ekuinas Private Credit Fund with RM800 million in assets under management. Aside from Malaysia’s government-backed funds like Ekuinas and Malaysia Debt Ventures, the remaining funds are either wholesale funds or spin-offs from venture capital or private equity.
Framework for private credit funds in Malaysia
In comparing the reported private credit funds with information published by the SC, we can surmise that Malaysia’s private credit funds are generally governed by one of the following frameworks:
1. Registered Wholesale Funds
Registered wholesale funds are governed by the SC Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework (“UCMP Guidelines”) and managed by fund managers licensed with a capital markets services licence (“CMSL”)[2].
Under the UCMP Guidelines, registered wholesale funds which are unit trust schemes can only be offered for subscription or purchase to sophisticated investors.
2. VC/PE Spinoffs
Funds managed by registered private equity management corporations (“PEMC”) or venture capital management corporations (“VCMC”) are governed by the SC Guidelines on Registration of Venture Capital and Private Equity Corporations and Management Corporations (“VCPE Guidelines”).
Under the VCPE Guidelines, funds managed by PEMCs or VCMCs, which are typically set up as a corporation (private company or limited liability partnership), can only be offered for subscription or purchase to sophisticated investors.
What Private Credit is Not
To understand the regulatory landscape, it is equally helpful to identify what else, in addition to commercial bank lending, falls outside the definition of private credit:
1. P2P financing
Registered P2P platform operators operate electronic platforms for debt fundraising through the issuance or offering of investment notes, connecting small to mid-sized companies to a pool of lenders. These notes are typically redeemed over a 24-month timeframe with fixed interest or profit payments.
There are currently about 20 registered P2P platform operators in Malaysia approved by the SC as Recognized Market Operators (“RMO”) [3]. These RMOs are regulated under the SC Guidelines on Recognized Markets (“RM Guidelines”), which differs from the licensing or registration frameworks used for fund managers and PE/VC corporations.
While P2P platforms share functional similarities with private credit, such as providing non-bank debt to MSMEs, they are best viewed as a standalone form of credit. The inclusion of a retail investor base and the availability of secondary market liquidity prevent them from being categorized as private credit, which traditionally relies on sophisticated capital providers and illiquid, long-term mandates.
2. Corporate bonds and Sukuk
Corporate bonds and sukuk are debt instruments issued by public or private companies to raise capital from the broader market. These instruments are typically listed on a bond or sukuk exchange, such as Malaysia’s Bond+Sukuk Information Exchange, where they are subject to stringent disclosure requirements and credit ratings.
The governance of these instruments falls under the Capital Markets and Services Act 2007 (“CMSA 2007”), which mandates specific prospectus requirements and trustee oversight to protect investors. Unlike the private, bilateral nature of private credit, listed bonds are public instruments designed for high liquidity in the secondary market.
The primary reason these are excluded from the private credit definition is the nature of the “upstream”. Once exchange-listed, the capital providers cease to be sophisticated, mandate-driven private entities and instead consist of the investing public. This shift from private mandates to public market participation fundamentally changes the character of the debt from “private” to “public”.
3. Licensed moneylending
Licensed moneylenders typically serve as a quick source of credit to individuals and small businesses. Their operations involve the provision of loans, often for shorter terms or smaller amounts than those found in corporate finance.
These entities are strictly regulated by the Moneylenders Act 1951 and fall under the purview of the Ministry of Housing and Local Government. Their operations are governed by a rigid consumer protection framework that caps interest rates and mandates specific form-based loan agreements to prevent predatory lending.
Licensed moneylending is distinguished from private credit by the absence of a sophisticated, mandate-driven upstream investor base. Furthermore, the heavy reliance on a consumer protection framework for small-scale borrowers contrasts with the “sophisticated-to-sophisticated” negotiations that characterize the private credit market.
4. Consumer credit
Consumer credit facilities include a wide range of non-bank lending options such as pawnbroking, hire purchase, and Buy-Now-Pay-Later (BNPL) schemes. These facilities are designed to finance personal consumption rather than corporate operations or industrial expansion and are variously subject to the Consumer Credit Act 2025.
The critical distinction here is the “downstream” target. Regardless of the size of the lender’s loan book, the borrower in a consumer credit facility is almost always a natural person, not a corporate entity. Private credit, by definition, focuses on corporate borrowers and industrial financing; therefore, the focus on individual consumption takes consumer credit entirely outside the private credit perimeter.
Conclusion
Defining the exact boundaries of private credit in Malaysia is more than just a technical exercise; it is about understanding the specific risk and return profile that sets this asset class apart. As we have explored in this article, private credit exists in the space where sophisticated capital meets corporate borrowing needs without the public disclosure requirements of listed bonds or the retail-focused protections of moneylending and consumer credit laws.
While the definition is becoming clearer, the legal architecture supporting it remains fragmented, forcing industry participants to adapt existing guidelines to fit their specific fund structures. To truly understand how this market functions in practice, one must look deeper into the legislative hurdles that govern the private credit landscape today. In Part 3 of this series, we will transition from defining the market to navigating its regulatory maze, where we will examine the interplay between the CMSA 2007 and the Financial Services Act 2013.
[1] The Edge Malaysia, ‘Cover Story: ‘liquidity illusion’ of private credit’ (30 March 2026)
[2] Section 58(1) of the Capital Markets and Services Act 2007 (“CMSA 2007”) read with Paragraph 3, Part 1, Schedule 2 of the CMSA 2007
[3] Section 34(1) of the CMSA 2007
About the authors
Shaun Lee Zhen Wei
Principal Associate
Corporate & Investor Services
Halim Hong & Quek
shaun.lee@hhq.com.my
.
Sherzanne Lee
Senior Associate
Corporate & Investor Services
Halim Hong & Quek
sz.lee@hhq.com.my
.
Carmen Lee Kar Mun
Associate
Corporate & Investor Services
Halim Hong & Quek
carmen.lee@hhq.com.my
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