The GCC region has witnessed a rise in private credit activity in recent years – driven by national economic diversification initiatives, regulatory reforms and a growing demand for alternative financing solutions.
“There is growing demand for income-generating private credit products, supported by rising fixed income yields, amid structural changes in the region’s economies,” Amwal Capital Partners Partner and Co-Head of Fixed Income Sharif Eid shared with IFN Investor.
Despite well-established banking systems, many mid-market companies and SMEs in the GCC face difficulties securing credit, particularly Shariah compliant financing, Sharif explained.
Private credit funds are filling this financing gap, with tailored solutions that combine asset-backed structures with compliance to Islamic finance principles. “We’re seeing a shift away from government-led credit towards private sources of capital.”
Sharif estimated the financing gap for SMEs in the greater Middle East and North African region to be at US$250 billion – with credit extended to this sector making up barely 5% of the total versus 20% in developed markets – notwithstanding the meaningful contribution of SMEs to GDP.
“We believe non-bank financing has significant room for growth, particularly in the alternatives space. The unmet financing needs of SMEs represent a significant opportunity for private equity and credit funds.”
Another key influence cited by Sharif is a noticeable trend of how fixed income yields have increased significantly since around 2021 on higher interest rates – which has naturally resulted in a growing demand for income-generating products.
“Also, we’ve seen more volatility in both equity and fixed income markets. Private credit, both regionally and globally, offers lower correlation and lower beta to public markets. That makes it very attractive from an asset allocation perspective.”
The region is further going through structural and economic diversification away from oil revenues, backed by significant regulatory and legal reforms, key developments which Sharif noted have made private credit investing more viable.
“It’s a convergence of all these factors, with higher yields, market volatility and regional transformation, that is driving a very strong wave of interest in the space. Frankly, we haven’t seen this level of demand for this type of product before.”
Sharif said there is a strong desire by national governments to build a broad range of industries across the region. “It would be hard to find a sector where there isn’t interest in expanding private sector participation. And many of these industries are capital-intensive.”
