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Domestic corporate bond and sukuk markets doubled in size over the past five years — hitting USD 37.7 bn in 1Q 2025, up from just USD 15.5 bn in 1Q 2020 — but the market’s still looking a little one-dimensional, according to a deep-dive from S&P Global Ratings.
Who’s holding the bag? Banks. A whopping 65% of outstanding corporate debt is in the hands of financial institutions, followed by state-owned non-financial firms (25%). The private sector, meanwhile, holds just 10%.
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Corporates still prefer to borrow the old-fashioned way: The Kingdom issued USD 92.7 bn in sovereign debt and USD 63.5 bn in non-sovereign debt over the same five-year period. But compare that to USD 804 bn in private-sector bank loans as of April 2025, and it’s clear the banking route still seems to be the go-to for most companies.
Why this matters: The government has been laying the foundation since 2015: Think monthly SAR sukuk issuances, and sweeping regulatory reforms under the Financial Sector Development Program. But until local institutional investors — pension funds, insurers, asset managers — get more involved, the market may struggle to build real depth.
How big is the debt market vs. the economy? Total domestic debt (sovereign + corporate) hit 20.7% of GDP in 1Q 2025. Corporate debt alone climbed to 3.4%, up from 1.9% in 2020 — solid growth, but still a far cry from levels in Brazil or South Africa, the report said.
Still shallow waters: Liquidity remains low in the debt market, with secondary trading remaining minimal because most local banks buy and hold. Foreign investors barely register — making up less than 2% of all listed and unlisted debt, despite the country’s push to open things up via Euroclear access, better tax treatment, and inclusion in EM indices.
Looking ahead: S&P expects state-owned enterprises to keep dominating for now, followed by the occasional blue-chip private name. But if Saudi Arabia wants the kind of deep, diverse debt market seen in Malaysia, Brazil, or South Africa, it’ll need to activate retail investors, expand the pension system, and empower asset managers with real mandates, the report reads.
