Technology and private lending set to drive EMEA loan market future, finds research

The Loan Market Association recently launched its 2040: The Future for EMEA Loan Markets report, looking at how the next 15 years could play out across the region.

The findings, based on research involving more than 230 senior EMEA market participants, suggests continued growth in lending and a rise in participation from private and institutional investors, along with an increased presence for AI and automation processes right across the lending lifecycle.

Matthew Escritt, a finance expert with Pinsent Masons in Dubai, said the report provided a useful roadmap for how the lending landscape in the region could evolve over the next 15 years.

“While short-term market conditions remain influenced by geopolitical uncertainty, inflationary pressures and broader economic volatility, the report highlights a strong long-term outlook for loan markets driven by increasing financing demand, deeper pools of capital and greater participation from private credit and institutional investors,” he explained.

“The report also suggests that technology, regulatory developments and sustainability considerations will become increasingly important drivers of market behaviour.

“Businesses should therefore be considering not only future funding requirements, but also how evolving regulatory expectations, AI-enabled tools and sustainability-related risks may influence financing structures, credit decisions and investment opportunities in the years ahead.”

The report identifies three primary factors which will shape the next decade and a half for the loan markets within the region – regulation, sustainability and technology – with the Middle East predicted to play an increasingly important role in the global lending markets as demand for liquidity and financing continues to grow, particularly around infrastructure, digital transformation and energy projects.

“Trillions of dollars in capital will be required to modernise infrastructure, strengthen energy security, accelerate technological development, support industrial transformation and finance businesses across every sector of the economy,” the report notes.

The growing focus on AI and making use of automated decision making in lending processes will be a significant factor by 2040, although the authors note that while this requires confidence in deployment it will also require rigorous governance, with a need for greater collaboration and connectivity between regulators.

Closer alignment for regulators to enable smoother cross-border financing will also be a factor for loan market development, while the need for deeper integration of sustainability requirements will be a factor in decisions around lending and credit facilities, with the report warning: “Sustainability and transition considerations must move beyond specialised frameworks and labelled products to become an integral part of mainstream financing, capital allocation and risk management decisions.”

This will create extra challenges for market participants as they look to adapt to a more technology driven and interconnected lending system, with non-bank liquidity becoming a significant structural trend within the EMEA loan markets as private credit funds, institutional investors, and other non-bank capital providers continue to increase their share of lending activity.

Hala Abdulghani, a lending expert with Pinsent Masons in the Middle East, said the report’s findings would only increase in importance as investment in the region continued to rise.

“For borrowers, lenders and investors in the Middle East, the findings are particularly relevant given the scale of investment being directed towards infrastructure, energy transition, technology and strategic development projects across the region,” she said.

“As financing requirements continue to grow, access to a broader range of capital providers and financing solutions is likely to become increasingly important.