Corporate Credit Portfolio Growth in Emerging Markets: A Review of Advances in Credit Decisioning and Governance

Abstract

Corporate credit in emerging market economies expanded rapidly through the second half of the 2010s, and by 2020 the portfolios lenders held had changed in composition as well as in size. This paper reviews what changed over that period in the two capabilities that determine whether such an expansion is durable: the decisioning machinery that selects, prices, structures and monitors exposures, and the governance architecture that constrains, validates and reviews the resulting decisions. The review synthesises 200 sources published up to 2020, combining 120 recent applied and conceptual studies concentrated in the five years to 2020 with 80 established scholarly and institutional works on credit measurement, bank governance and supervision, drawn from the credit, audit, financial analytics and compliance literatures and from the technical literatures on the sectors in which emerging market corporate exposure is concentrated. Three findings emerge. Decisioning advanced through a series of cost reducing innovations, including structured risk evaluation models built for sparse data conditions, financial analytics oriented to cross border cash flow and tax exposure, predictive methods imported from marketing and operations, improved reconciliation and reporting infrastructure, and a sharp fall in the cost of verifying physical assets through remote inspection and condition monitoring. Governance advanced less evenly, and the most developed and most directly tested risk governance practice in the corpus comes from industrial safety, construction and regulated manufacturing rather than from banking, where four requirements recur independently: independent assurance, documented risk assessment before authorisation, defined escalation with named accountability, and retrievable evidence that controls were in force. The two capabilities diffused at different speeds because analytical improvement is demonstrable within a planning cycle while control effectiveness is observable only as a counterfactual. The paper develops a conceptual model in which decisioning capability sets the attainable reach of a portfolio, governance capability determines how much of that reach is realised without unintended loss, and measurement and access integrity moderates both, together with four propositions and three stated boundary conditions. Implications are drawn for lenders, supervisors, policymakers and borrowers, and five research directions are identified, the most significant being the absence of any work linking the operational determinants of borrower performance to realised credit outcomes.