Monumental Shift of Private Credit in KSA: A Game Changer for Businesses and Investors

Murtaza Ali Asghar Sistanwala

Analyst - Advisory & Consulting

Saudi Arabia’s financial landscape is undergoing a major transformation, and private credit is at the core of it. Around 97% of the institutional investors in the Middle East see KSA as the top destination for private credit investments in the region for this year. As the Kingdom pushes forward with its Vision 2030 agenda, businesses, investors, and entrepreneurs are looking for newer ways for funding beyond traditional financing. That is where private credit steps in offering flexible, customized financing solutions that are changing the way companies access capital.

What Exactly is Private Credit?

Private credit is a smarter, more flexible alternative to bank loans. Borrowers do not need to deal with lengthy and strict banking checklists; instead, they can directly secure funding from private institutions or individual investors. The best part is that private credit has more flexibility. Private lenders can customize their advances to meet a borrower's specific needs, whether it’s a startup getting off the ground, a mid-sized company looking to grow, or a massive project that needs serious capital. Private credit or lending can be done through: Direct Lending – Providing credit to businesses directly without the intervention of an intermediary, Mezzanine Financing A combination of debt and equity that allows lenders to potentially gain ownership in a company., Distressed Debt – Providing funding to financially distressed companies or those nearing bankruptcy, with the possibility of recovery and growth.

Boom of Private Credit in Saudi Arabia

The GCC and Egypt private credit market is expected to grow at a CAGR of 15-30% in the next five to six years. The rise of private credit in Saudi Arabia isn’t happening by chance—it’s being driven by many key factors such as traditional bank limitations — due to the strict criteria for lending after the 2008 global crisis many borrowers are shifting towards private credit for simpler financing options. Vision 2030 is Fueling Demand—KSA’s rising star Vision 2030 is bringing soaring investments in tourism, technology, real estate, etc. This is pushing new industries to emerge in the market, and businesses need financing that banks may not provide, which is creating a huge gap for private credit lenders. Research indicates that KSA accounts for as much as 27.7% of private debt deals in the MENA region. Complementing Vision 2030 the Mega-Projects Need Massive Funding—Major developments like NEOM, The Red Sea Project, and Qiddiya require massive investments. Private credit is stepping in to fill the role, helping these projects move forward at full speed. Lastly, KSA is Attracting Global Investors—Due to the recent easing in regulations in KSA, authorities have made investments easier for foreign investors. With high-yield opportunities available in the Kingdom, international firms are taking notice of KSA’s private credit such as Goldman Sachs Asset Management, Z Capital Group, etc.

Which Sectors Are Driving Private Credit Growth?

Private credit is being used almost across every industry in Saudi Arabia, but some sectors are leading the charge: Infrastructure & Real Estate – Private funding is driving growth in this sector, supporting major projects like NEOM, The Red Sea Project, and Qiddiya, which is transforming smart cities and luxury resorts. Technology & Startups – With the trend of VCs on the rise, initiatives like the Saudi Venture Capital Company are contributing billions in investments to the Tech and Startup sector which is being supported by private credit. SMEs & Mid-Sized Businesses – Many businesses that do not qualify for traditional bank loans go for help from private lenders for financing which is increasing more demand for both private credit and SMEs.

What makes Private Credit a Win-Win for Investors and Borrowers?

Private credit isn’t just good for businesses/borrowers—it’s a golden opportunity for investors as well.

For Investors: Higher Returns – Private credit usually offers better yields compared to traditional bonds because of the risk factor that is involved. A PwC report highlights strong private credit performance in MENA, with returns averaging 6.5% above LIBOR and 2.4% higher than institutional loans. Diversification – Investors can get access to high-growth industries and projects that are not available publicly. Long-Term Opportunities – Large-scale projects will provide investors with steady and long-term returns.

For Businesses & Borrowers: Access to Capital – They get funding even when banks say no to them. Flexible Terms – Repayment structures are tailored to fit business needs. Retain Ownership – Unlike equity financing, private credit lenders allow businesses to keep control.

The Challenges Ahead

Despite its rapid growth, private credit in Saudi Arabia does face some hurdles such as Regulatory Development –The sector is still evolving stage, and clear policies are needed to support long-term growth. Liquidity Concerns –Private credit investments are less liquid because they are structured according to the specific parties, making it harder for investors to exit. Risk Management – Ensuring that the borrowers can and will repay their loans is critical in this market as there is a high probability of default.

Conclusion

As private credit continues to reshape Saudi Arabia’s financial landscape, its role is only expected to grow in the coming years. With government-backed reforms, rising foreign investments, and increasing demand for flexible financing, the market is on track for significant expansion. At the same time, due to the rise of private credit, there is a growing demand for specialized advisory services. Businesses and investors are heading towards financial experts and consulting firms for guidance on structuring loans and managing risks. This growing support system ensures that borrowers secure the right funding while investors make well-informed decisions to maximize their returns. For those looking to tap into new opportunities, now is the perfect time to explore KSA’s private credit market.