Why Saudi Investors Are Turning to Private Credit Through Invoice Financing

From Bank Credit to Private Credit Channels

As traditional bank lending becomes constrained by regulatory and capital requirements, private credit including invoice financing is emerging as a compelling alternative in Saudi Arabia. Investors looking for structured, predictable returns are now channeling capital toward receivables-based financing and venture debt, a shift that’s aligned with the Kingdom’s Vision 2030 goals of economic diversification and SME growth.

Saudi Arabia’s Private Credit Market: Rapid Growth and Momentum

In 2022, private debt funds targeting Saudi Arabia raised USD 335 million, up sharply from just USD 32 million in 2003.
By the third quarter of 2024, eight active funds were targeting over USD 1.77 billion in capital focused on Saudi clients.

Analysts forecast the GCC and Egypt private credit market could reach USD 10–11.5 billion in assets under management by 2030, growing at a CAGR of ~9% from FY24 to FY28.
Saudi Arabia has signalled ambition to further expand: estimates suggest its private credit market could surpass USD 100 billion deployed assets by 2030, anchored by partnerships with sovereign wealth funds and development finance institutions.

Recently, Hassana Investment Company and Franklin Templeton signed a USD 150 million MoU to accelerate Saudi Arabia’s private credit infrastructure.

Why Saudi Investors Are Favoring Invoice-Financing within Private Credit

Private credit strategies in Saudi Arabia include mezzanine financing, venture debt, and short-term receivables financing. Invoice financing distinguishes itself by offering:

1. Asset-Backed Short-Term Returns

Instead of senior secured loans, investors finance receivables backed by actual invoices often from corporate or government buyers. Short durations (30–90 days) and strong receivable collateral reduce duration and default risk.

2. Yield Advantages in a Low-Rate Environment

While average GCC private credit returns are 7% above LIBOR, invoice financing structures can yield 12–14% IRR in structured pools significantly higher than regional sukuk (~4–5%) or bank deposits (~3%).

3. Capital Directed toward SMEs and Vision 2030 Goals

SMEs account for over 99% of Saudi businesses, yet receive less than 10% of bank credit. Invoice financing fills the liquidity gap, enabling SMEs to grow without diluting equity a key goal of economic diversification under Vision 2030.

4. Regulatory Support and Structural Expansion

CMA and SAMA reforms including Qualified Foreign Investor (QFI) frameworks have opened Saudi’s private credit environment to global investors. Platforms like Lendo and Tameed are licensed to facilitate SME and government PO financing under central bank supervision.

Featuring Invoice Financing as a Private Credit Tool

Case Examples and Market Signals

• Ruya Partners arranged a USD 50 million structured debt facility for a Saudi logistics firm servicing NEOM, a project exemplifying trade-finance demand beyond bank scope.
• Riyad Capital provided a SAR 300 million (~USD 80 million) mezzanine loan to a mid‑tier developer near Diriyah Gate—an example of private credit bridging for real estate in Saudi Arabia.
• Invoice financing fintech Lendo raised a USD 30 million private credit facility in 2024 to expand SME invoice-financing services—marking one of Saudi’s first fintech-originated private credit deal.

Navigating Challenges: Best Practices for Saudi Investors

• Due Diligence & Legal Oversight: Carefully assess covenant packages, underlying collateral quality, and enforcement mechanisms, especially in mezzanine structuring.
• Platform Assessment: Choose licensed providers (e.g., Lendo, Tameed), with transparent underwriting, Fatoora e‑invoicing integration, and proven recovery processes.
• Diversification: Spread capital across sectors SME, logistics, healthcare, construction to minimize reliance on one industry.
• Yield vs. Liquidity Trade‑off: Invoice‑backed credit offers regular cash flow, but secondary liquidity remains limited; most holders hold receivables to maturity.

Conclusion: Private Credit via Invoice Financing. A Strategic Fit for Saudi Investors

Saudi investors are increasingly embracing private credit structures, of which invoice financing is a critical component. With short-term, asset-backed returns and alignment with regulatory reforms and Vision 2030 targets, invoice financing delivers compelling financial and strategic value.

As capital shifts toward non-bank channels, integrating receivables-based private credit can offer reliable yields, controlled risk exposure, and direct impact on SME growth and economic diversification.

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