Private Debt in the Global South: A Status Report

As a result of decreasing investment in public goods since the 1990s, household debt in many Global South countries has risen, driven by factors such as financial sector liberalization, increased access to credit, and urbanization. This trend accelerated with a renewed emphasis on derisking, where mobilizing private capital for development projects in the Global South via implementing strategies that shift investment risks on the public purse, further reduced investment in essential services. Consequently, households increasingly resort to private financing options for services like education, healthcare, and housing, leading to higher household debt levels.

Figure 1. Borrowing behavior in low and middle income countries. Source, World Bank, Global Financial Inclusion Database 2021.

While comprehensive data for all non-OECD countries are limited, available statistics highlight notable trends in specific regions. In countries like China, household debt as a percentage of GDP rose from approximately 18% in 2008 to over 60% by 2020.[1] Other nations such as Thailand have experienced significant increases in household debt. By 2024, Thailand's household debt reached 90.8% of GDP, one of the highest ratios in Asia.[2] On the corporate end, derisking also encouraged a surge in corporate borrowing as companies take advantage of favorable conditions to fund development projects with lesser strings attached. Between 2008 and 2018, corporate debt in emerging economies rose from 56% to 96% of GDP, reflecting increased borrowing to finance growth and investment.[3] 

Figure 2. Borrowing behavior in upper middle income countries. Source, World Bank, Global Financial Inclusion Database 2021.

In addition, informal borrowing—obtaining funds from sources such as family, friends, moneylenders, and pawnbrokers—remains a prevalent practice in the Global South, particularly among populations with limited access to formal financial services. Many individuals lack access to banks or credit institutions due to structural, economic, or regulatory barriers. While precise figures are challenging to obtain due to the unregulated nature of these transactions, recent findings show that a significant portion of the population relies on informal financial mechanisms.[4] According to the 2021 Global Findex report, informal borrowing remains common in many regions, particularly where access to formal financial services is limited. 

[1] See https://tradingeconomics.com/china/households-debt-to-gdp

[2] See https://www.reuters.com/world/asia-pacific/thai-household-debt-record-high-amid-sluggish-economy-survey-shows-2024-09-10/

[3] See Abraham et al. 2021, https://doi.org/10.1093/acrefore/9780190625979.013.302

[4] See https://www.worldbank.org/en/publication/globalfindex/Report