The global private credit market has experienced substantial growth over the past decade, increasing from US$300 billion in 2010 to US$1.6 trillion in 2023. This rapid expansion has been driven by strong demand for non-bank lending from small- and medium-sized enterprises (SMEs) and the tightening of bank regulations in developed countries. The GCC and Egypt private credit market is not an exception to this global trend.
This research paper aims to estimate the current size of the GCC and Egypt private credit market and assess its growth potential over the next decade. It also explores the unique private credit environment of countries within this market.
“Dubai has cemented its position as a leading global hub for private wealth, with its future- forward and growth-driven approach to governance and regulation. The emirate is home to the highest concentration of private wealth across the Middle East, as it continues to offer a thriving business ecosystem and safe economic climate for high-net-worth individuals and family offices.”
Over the next five to six years, the GCC and Egypt private credit market is expected to grow between 15-30% CAGR.
The GCC and Egypt’s private capital (PC) market shares similarities with the Asia-Pacific (APAC) sector from five years ago. This suggests the potential for comparable growth, with annual increases projected at 15-30% over the next five to six years.
These growth rates could expand the total size of the private credit market in the GCC and Egypt to between US$11 billion (comparable to APAC) and US$20 billion (comparable to India) within the next six years.
Growth rates in the GCC and Egypt PC market will be dependent largely on factors, including demand for credit from the industrial sector, particularly from small- and medium-sized (SME) companies, and a conducive regulatory and macroeconomic environment.
Factors driving the growth of private credit assets
Tightening credit conditions
Banks in certain regions already have a high Loan-to-Deposit Ratios (LDRs), limiting their ability to continue to lend at the same pace as was historically the case.
In addition, increasing demand for financing to support large-scale infrastructure and energy transition projects are driving up the pricing for credit, making it conducive for private credit funding to participate in the wider ecosystem.
Growing interest from family offices
Private credit accounts for just 2% of Middle East family office portfolios, compared to the US and EU, where family offices allocate 4% and 3%, respectively.
Family offices have actively begun to include private credit assets in their portfolios. Since 2021, the share of private credit assets has increased from 0% to 2%4.
Allocation to the private credit asset class could change significantly due to the introduction of bankruptcy laws and changes in the regulatory environment in DIFC.
Institutional investors growing demand
ADIA and Mubadala have actively started to participate in the private credit market. By the end of FY23, both funds had collectively invested more than US$10 billion globally into the PC space, and continue to grow their share through strategic collaboration with well-established international players such as KKR and Blue Owl Capital.
The deployment of government-backed funds into the private capital market in the UAE is expected to accelerate significantly due to the growing interest in private lending and a widening credit demand and supply gap.
UAE Vision 2030 and SMEs
A critical component of UAE Vision 2030 is fostering a sustainable, knowledge-based economy that relies not only on large corporations but also on the dynamic growth of small- and medium-sized enterprises (SMEs).
As the government prioritises supporting SMEs as a key driver of economic diversification and job creation, private credit becomes an essential source of financing for these organisations, helping to fuel their growth.
Nascent capital market
The UAE capital market is considered to be in its early stage of development compared to the US and EU markets. This naturally imposes constraints on the ability of SMEs to seek additional funds outside the banking industry.
Private credit will fulfill the constantly growing demand gap for SMEs. It is likely that the ability to borrow funds outside the banking industry will become a primary growth catalyst.
Adaptation of innovative platforms
The UAE has made significant strides in adopting fintech solutions. As a result, the private credit market has become more accessible to a broader range of investors through digital platforms.
These platforms enable greater transparency, ease of investment and access to previously illiquid or opaque markets. For example, the Dubai Financial Market recently launched Arena, a private credit-oriented platform that provides a regulated alternative to conventional financing.
Looking forward
The private credit market in the GCC and Egypt will create significant opportunities for both new and existing investors in 2025. This growth will be fueled by organic demand from SMEs, supported by substantial government programs in the region, along with tightening financial regulations for banks, which will widen the credit demand gap. As traditional bank lending becomes more constrained due to stricter regulations, alternative financing options such as private credit will become increasingly attractive.
Moreover, the attractiveness of these investments will continue to rise for portfolio managers in international funds, who will seek higher returns in an environment of declining interest rates. The private credit market appeal will be enhanced by the strong potential for capital appreciation, particularly in sectors that are seeing rapid expansion, such as technology, infrastructure, and renewable energy.
As regional economies continue to diversify, private credit will play a crucial role in supporting the growth of innovative startups, infrastructure projects, and other key industries. The UAE, in particular, with its progressive economic policies and strategic location, will be at the forefront of this trend, drawing both regional and global investors. With increasing investor confidence and a robust regulatory framework, the GCC and Egypt market is becoming a key player in the global private credit space.
