GCC Private Credit Market Set to Hit $5 Billion in 2026 as Bank Lending Tightens

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Alternative finance expands: GCC private credit forecast at $5bn in 2026 as banks tighten, regulatory demands increase.

Private credit in the Gulf Cooperation Council region is projected to reach approximately $5 billion in 2026, marking a 25% year-on-year increase. This expansion reflects a fundamental shift in regional financing as traditional banks reduce lending to mid-market companies due to new regulatory capital requirements taking effect this year.

The growth trajectory extends well beyond 2026. Industry forecasts suggest the local addressable market could reach $12 billion by 2030, with some analyses placing the broader regional potential—including Egypt—at $20 billion. This expansion is being driven by widening credit gaps, particularly for SMEs and innovation-economy sectors that lack traditional collateral assets.

Market Demand Outpaces Bank Supply

A structural imbalance is reshaping GCC credit markets. In Saudi Arabia, credit demand is growing at 10-14% annually while bank deposit growth lags at 6-7%. This divergence is creating significant funding gaps that traditional lenders are increasingly unable to fill.

Data from Channel Capital Advisors' October 2025 roadshow—which engaged over 90 organisations representing more than $2 trillion in assets under management—reveals strong institutional interest. Some 82% of regional partners indicated they are already active in private credit or plan to enter the asset class in 2026. Industry participants describe the UAE market as being in the "second inning" of its private credit lifecycle, suggesting substantial room for maturation.

Regulatory Pressures Drive Bank Retreat

Regional banks face dual pressures that are constraining their lending capacity. New banking regulations implemented in 2026 require higher capital reserves, making loans to non-government and non-prime corporate borrowers more capital-intensive and expensive to underwrite.

According to Moody's analysis cited in recent industry discussions, local banks could tighten lending standards by up to 20%. This contraction disproportionately affects mid-sized corporates, SMEs, and technology sectors—precisely the segments that lack the hard assets required for traditional bank collateral. As banks retreat to core relationship lending for large government-related entities and top-tier family conglomerates, private credit funds are stepping in to finance the "underserved middle."

Key Growth Sectors and Opportunities

The estimated $210-240 billion SME funding gap across the MENA region represents the primary opportunity for private credit providers in 2026. Asset-backed finance—particularly trade financing for free-zone entities and revenue-based financing for technology companies—is attracting significant capital deployment.

The region's Buy Now, Pay Later platforms, including Tabby and Tamara, represent another high-growth segment requiring flexible working capital lines. These fintech companies and other specialty finance issuers are increasingly turning to private credit as traditional banking relationships prove insufficient for their rapid scaling requirements.

A critical market gap identified for 2026 is the scarcity of Sharia-compliant private credit strategies. With most current offerings being conventional, there is substantial unmet demand for Islamic private credit structures to serve local family offices and Islamic institutions. This represents a significant opportunity for fund managers capable of structuring compliant products.

The Originate-to-Distribute Model Emerges

To manage balance sheets under new capital rules, GCC banks are shifting from an "originate-to-hold" model to an "originate-to-distribute" approach. This transition, expected to double by 2030, creates partnership opportunities between banks and private credit funds rather than pure competition.

Banks are increasingly selling loans off their balance sheets to private credit providers, creating a secondary market that helps maintain credit flow to the real economy while allowing banks to manage their regulatory capital requirements more efficiently. This structural evolution suggests private credit will become an integral part of the regional financial ecosystem rather than merely an alternative channel.

Higher Standards for Borrowers

As the market scales, legal protections are tightening. According to analysis by Pinsent Masons and A.O. Shearman, lenders deploying capital in 2026 are demanding more robust protections than in previous cycles. New deal structures increasingly feature stricter information rights, cash sweep mechanisms, and operational covenants that give lenders greater visibility and control.

For borrowers, this means access to capital is faster and more flexible than traditional bank loans, but it requires higher levels of financial transparency, governance, and operational discipline. Companies seeking private credit financing in 2026 should prepare for enhanced due diligence and ongoing reporting requirements as standard conditions of funding.