Introduction

As traditional banks continue to retreat from many forms of lending, Non-Bank Financial Institutions (NBFIs) have become increasingly central to the evolution of the private credit market. At Kingsbury & Partners, we focus on this segment because it combines the characteristics professional investors value most: yield, security, and liquidity — all underpinned by real, income-generating assets.

What Are NBFIs?

Non-Bank Financial Institutions (NBFIs) are regulated financial entities that perform many of the same core lending functions as banks — without taking deposits. They lend to consumers, SMEs, and corporates; they purchase non-performing loans (NPLs); they finance assets like vehicles, equipment or invoices. But unlike banks, NBFIs are not encumbered by the same regulatory capital requirements, giving them flexibility and agility to operate in underserved segments of the economy.

They are typically more specialised, technology-driven, and focused on a narrow niche — whether that's subprime auto loans, student loan refinancing, merchant cash advances, or bridging finance. This operational focus, combined with lean cost structures and data-led underwriting, allows NBFIs to originate loans with attractive yields and measurable risk. For a wider introduction to the sector, see why NBFIs matter for investors.

Comparison table of banks and non-bank financial institutions across deposits, capital rules, focus, operating model and behaviour in downturns
How NBFIs differ from banks, and why that matters for private credit investors.

Why NBFIs Matter More Today

Regulatory changes and market forces are reshaping the global credit landscape. Under Basel III and upcoming Basel IV regulations, banks are required to hold more capital against lending, particularly for higher-risk assets. This is leading to:

  • A decline in small business and consumer lending by banks
  • A growing credit gap in underserved sectors
  • Increased demand for alternative finance

According to the OECD, NBFIs now account for over 50% of all credit growth globally outside of traditional banks (OECD, 2023).

Update (October 2026): The final Basel III reforms (often called Basel IV, or Basel 3.1 in the UK) have applied in the EU since January 2025 and take effect in the UK on 1 January 2027, while the US has been reworking its proposals (A&O Shearman). The Financial Stability Board's latest data show non-bank financial intermediation grew 9.4% in 2024 to $256.8 trillion, about twice the pace of banks and 51% of global financial assets (FSB).

In a high-rate, low-liquidity environment, NBFIs are well-positioned to step in — and private credit investors are taking note.

Why NBFIs Are a Natural Fit for Private Credit

At Kingsbury & Partners, we specialise in short-duration, asset-backed private credit. NBFIs align with this model because they offer:

  • Immediate cash flow from underlying loan portfolios
  • Secured lending backed by receivables or real-world assets
  • Transparent structures with clear terms, covenants, and exits
  • Macro-resilience as they often gain market share during downturns

Unlike many growth-stage businesses, NBFIs can achieve positive cash flow from day one. This makes them highly investable from a credit perspective, especially when underwriting discipline is strong.

How This Benefits Professional Investors

Investors increasingly seek predictable, income-generating assets with downside protection. Our focus on NBFIs delivers:

  • Contractual returns via secured lending structures
  • Capital preservation through over-collateralisation and active monitoring
  • Access to private credit in an asset class that remains under-allocated in many portfolios
  • Uncorrelated yield away from traditional public markets

As more investors diversify into private credit, NBFIs represent one of the most reliable and scalable segments.

How We Support NBFIs Through Credit Linked Notes

As well as investing in NBFIs, we structure and scale their access to capital through Credit Linked Notes (CLNs).

Our CLN structures give professional investors access to secured, income-producing credit lines to NBFIs with:

  • Clear security over loan books
  • Contracted interest and repayment terms
  • Active monitoring of collateral, performance, and covenant compliance

This approach ensures transparency, alignment, and discipline throughout the investment lifecycle. Our wider approach is set out in Carving Our Niche: Our Investment Strategy.

In Summary

NBFIs have become a critical force in the reshaping of global credit markets. For investors seeking predictable returns, capital protection, and short-duration exposure, lending to NBFIs through well-structured private credit vehicles is a powerful and scalable solution.

At Kingsbury & Partners, we back real businesses doing real lending. And we structure deals that work — for both borrowers and investors.

Frequently Asked Questions

What is a non-bank financial institution (NBFI)?

An NBFI is a financial company that lends or provides credit without taking deposits. Examples include consumer and SME lenders, asset finance providers, invoice financiers and debt purchasers.

How do NBFIs differ from banks?

NBFIs do not take deposits and are not bound by the same bank capital rules, which lets them specialise in niches banks find too costly to serve. They typically fund their lending through credit facilities from investors rather than customer deposits.

Why are NBFIs attractive to private credit investors?

Lending to an NBFI is secured on its loan book, which produces cash flow from day one. That gives investors contractual income, security over real assets and short duration.

How can investors get exposure to NBFI lending?

One route is a credit linked note, which gives professional investors exposure to a secured credit facility provided to an NBFI, with defined interest, repayment terms and reporting.