Saudi Arabia leads Gulf private credit demand in a small but fast-expanding market

Saudi Arabia is the Gulf’s largest source of private credit demand, in a regional market Moody’s puts at around USD 6 bn against roughly USD 1.8 tn globally. Regional sovereign wealth funds hold around USD 5 tn in assets, which the agency sees as the room for expansion as companies look past bank lending, according to its private credit report (pdf). “GCC private credit remains small, but is entering a period of rapid expansion,” said Annabel Schaafsma, managing director for global financial institutions. It can complement bank lending and institutional financing on both large transactions and smaller businesses needing more flexible structures, she said, adding that credit discipline will matter more than headline growth.

Moody’s puts SMEs at around 9% of Saudi bank lending, against a national target of 20%. Banks are getting choosier after several years of strong lending, with loan-to-deposit ratios reaching around 110% before moderating this year, which has eased some funding pressure. The agency has seen no material hit to asset quality from the conflict or project reprioritization so far, and its central scenario assumes trade flows return to pre-conflict levels by the end of 1Q27.

The listed debt market remains thin. Corporate bonds and sukuk accounted for 2.4% of total listed debt at the end of 3Q, with corporate borrowers raising around SAR 50.7 bn during 2025. Assets under management reached around SAR 1.2 tn, up 18% y-o-y.

Securitization is the newer channel. Moody’s presented a SAR 431 mn residential mortgage portfolio, with senior sukuk expected to total around SAR 400 mn subject to market conditions, a weighted-average loan-to-value ratio of 57.8% and a weighted-average age of 5.8 years. Pier Paolo Vaschetti, VP ratings, called the transaction “a milestone for the institutional market in the Kingdom.” Further deals could broaden the investor base and give lenders liquidity, though Moody’s says sustainable growth needs transparent disclosure, clear risk allocation and strong regulatory protections.