One of the world’s fastest-growing asset classes is gaining steam among Gulf sovereign wealth funds and family offices — and is an emerging lifeline for Saudi Arabia.
Private credit allocations from Middle Eastern family offices have steadily increased from negligible in 2021 to around 2% of portfolios, picking up in 2022 when an end to zero-interest rate policies among central banks and slowing public markets began to push borrowers toward nonbank lenders. The Gulf’s state-backed investors have followed, with Abu Dhabi Investment Authority, Mubadala, and the Qatar Investment Authority among those building multibillion-dollar private credit platforms.
Saudi Arabia, by contrast, stands out for its domestic borrowing, according to S&P Global Ratings. While private credit still represents just around 2% of Saudi Arabia’s total debt — “nothing,” according to the head of the country’s capital markets regulator — the asset class has grown tenfold since 2020 to roughly $3.7 billion, according to the ratings agency. Vision 2030’s massive funding needs, particularly the emphasis on small-business owners increasing their contribution to the kingdom’s economy, is expected to drive continued demand.