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Institutions Turn to Private Credit and Tokenization as Traditional Bank Lending Tightens

Private credit continues to expand as institutions look beyond traditional bank lending for alternative sources of financing and yield. At the same time, asset tokenization is gaining attention as financial firms explore ways to make private market investments more accessible and liquid.
Chart showing the rapid growth of the private credit market as institutional investors increase allocations to alternative lending strategies.

Private credit growth accelerates as investors seek alternatives to traditional lending markets.


The U.S. private credit market has grown from roughly €425 billion five years ago to between €1.1 trillion and €1.3 trillion today. Growth has been supported by tighter banking regulations, reduced bank balance sheet capacity, and investor demand for private market exposure.


Evergreen private credit funds reached approximately €550 billion in assets by June 2025, while non-traded perpetual business development companies (BDCs) have expanded from almost no assets in 2021 to more than €170 billion today. Some forecasts expect the broader private credit market to exceed €1.7 trillion by 2027.


Institutional participation has become a major driver of the sector. A 2025 Nuveen survey found that 94% of institutional investors held private credit allocations, including pension funds, insurers, endowments, and sovereign wealth funds.


Banks have also become increasingly involved. Credit facilities provided by major U.S. banks to private credit vehicles increased approximately 145% between 2020 and 2024, reaching around €81 billion in 2024, showing that traditional lenders are increasingly supporting private credit managers.


Asset-based finance has emerged as one of the fastest-growing areas of the market. The strategy involves lending against specific assets such as equipment, receivables, or real estate rather than relying only on corporate cash flow.


Tokenization is adding a new layer of technology to the private credit market. The process involves representing real-world assets, including loans and credit instruments, as digital tokens recorded on blockchain networks.


Supporters argue that tokenization could improve settlement speed, transparency, and access to private market investments. Some platforms allow investors to participate with minimum investments of around €20–€25, compared with traditional private credit funds that often require significantly larger commitments.


Major asset managers including BlackRock and Franklin Templeton have already introduced tokenized funds, primarily focused on money market funds and short-term government securities. Some industry participants believe private credit could become one of the strongest applications for tokenization because the asset class has historically faced challenges around liquidity and price transparency.


However, the market remains in an early development phase. Regulatory frameworks for tokenized assets are still evolving, and analysts continue to monitor how private credit performs through a full economic cycle.


Rising defaults among highly leveraged borrowers, limited valuation transparency, and concerns around collateral management have increased scrutiny from regulators including the Federal Reserve, IMF, and Bank of England.


As private credit expands and blockchain technology develops, financial institutions are continuing to evaluate new ways to access, structure, and distribute private market investments.



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