Gulf private credit is closing a $250B gap, drawing $450M from Partners for Growth

The Gulf private credit market is still “nascent” versus global peers, but the size of the problem it is trying to solve is already real: a credit gap estimated at approximately $250 billion. In plain terms, GCC banks are lending selectively, and that leaves a huge slice of borrowers, especially SMEs, fighting for funding. Fortune reports that SMEs currently account for less than 10% of total bank lending in the GCC, partly because banks typically prioritize lending to large corporates and government-related entities.

That mismatch is where global private credit is stepping in, and Partners for Growth is one of the clearest examples. The firm, with headquarters in San Francisco and an office in Dubai, provided its first funding to a Gulf entity back in 2020. Since then, it has deployed around $450 million in commitments into the Gulf, predominantly across Saudi Arabia and the UAE, backing high-growth companies including Saudi fintech unicorn Tabby, TruKKer, Bayzat, Syarah, Huspy, and Silkhaus. It also provided $10 million funding to Tabby after Tabby’s seed round and continues to be a lender to it today.

So why is the Gulf suddenly showing up in private credit conversations? Start with incentives. Governments across the GCC are rolling out ambitious economic diversification strategies, including Saudi Arabia’s Vision 2030, UAE 2031, and the Dubai Economic Agenda (D33). Privatization and support for local SMEs are central to those plans. When the public sector’s diversification agenda meets a private sector that still struggles to finance growth, private credit becomes an obvious bridge.

In that bridge-building phase, the most important shift is how lenders underwrite risk. Many SMEs and newer tech companies do not have the long financial track record that traditional bank models prefer. Partners for Growth’s managing director, Armineh Baghoomian, told Fortune that its focus is “on lending to emerging tech and innovation companies,” noting that many companies it lends to have been around for maybe a year or two, with limited financial history and little to no profitability. In other words, the underwriting job is harder, but also where the opportunity window opens.

Baghoomian also highlighted the firm’s product angle: highly structured facilities for asset-heavy businesses, with most deals being sharia-compliant. She said “the birth to death of a transaction has been tested under sharia-structured instruments,” and that entrepreneurs tend to like and request them, while “a lot of investors request them as well.” That matters because for boards and treasury leaders, “eligibility” is part of funding. If your capital structure and documentation must fit sharia requirements, flexibility is not just a nice-to-have. It becomes the price of admission.

Partners for Growth has also partnered with regional entities such as Dubai International Financial Centre (DIFC), Saudi Venture Capital, Sukna Capital, which offers sharia-compliant financing and investment solutions to support SMEs, and Jada, an investment vehicle created by Saudi’s sovereign wealth fund PIF. That last connection is not cosmetic. It signals how sovereign priorities are increasingly shaping the capital stack. Baghoomian described it as a driver of “national agendas that are pushing economic diversification from a centralized source of revenue,” creating strong innovation ecosystems in each country, and drawing international institutional capital because “the fundamentals are sound.”

The competitive set is getting louder. In April, PIF announced it would anchor a new private credit fund managed by King Street Capital Management. The fund will provide capital to corporates and conduct asset-based lending across the region. King Street, which manages $30bn in assets and has been expanding its regional presence, argued in connection with that announcement that the regional private credit market will need to grow by at least 15-30% annually over the next five years to finance economic development in Saudi Arabia and the Mena region, and said it was in the process of opening an office in Riyadh. Last week, Blue Owl Capital launched a new regional headquarters in Abu Dhabi Global Marketplace (ADGM), moving beyond a Dubai presence to a broader Middle East footprint. Haitham Abdulkarim, managing director of Blue Owl’s Abu Dhabi office, told Fortune that Middle East demand includes “digital infrastructure, private credit, asset-backed finance, real assets, and General Partner strategic capital,” and noted the opening marks Blue Owl’s seventh office in EMEA and its 23rd globally.

Even big deals are increasingly tied to this same ecosystem logic. Last September, Blue Owl partnered with Qatar Investment Authority to launch a $3-billion digital infrastructure platform designed to accelerate computational capacity for hyperscalers. Baghoomian added another layer that boards should pay attention to: sovereign funds may require redeployment into the local ecosystem. She said that for every dollar you raise from sovereign funds, especially development-oriented ones, you should expect a requirement to reinvest in the local ecosystem.

Then there’s the stress test nobody can ignore: geopolitical volatility. Baghoomian said PFG initially saw a slowdown in business due to the Iran war, but has since seen a pickup as other lenders felt strain. She reported signing two new term sheets over the last few months and said that situations like this “really tests the capital providers in the region,” including reports that some funds paused lending while others planned to pull out.

Finally, the market sizing is the reality check that matters for anyone allocating capital or building financing strategy. At approximately $5 billion, the Gulf’s private credit market is modest compared with the U.S., estimated at $1.3 to $1.6 trillion in assets under management, representing roughly three-quarters of the global market. But a PwC study published last year noted that the market is becoming more sophisticated, transitioning toward specialized, targeted product offerings such as distressed debt. Baghoomian told Fortune that more products are being developed and launched than “even a year ago,” including more NAV financing and distressed deals getting done, plus General Partner financing. For executives and board members watching this corner of the credit world, the second-order implication is straightforward: structures and expectations that once belonged to the U.S. and Europe are increasingly arriving in the Gulf, which means competition for deals, pricing, and borrower behavior could change faster than the original “nascent” label suggests.