Saudi Arabia’s economy is undergoing a fundamental shift as authorities seek to reduce reliance on oil revenues and traditional banking. Private credit, often referred to as non-bank lending, is emerging as a vital component of this financial ecosystem, especially for mid-sized companies that face challenges securing adequate funding through conventional bank loans. These mid-sized enterprises constitute nearly half of the kingdom’s workforce but receive less than 10 per cent of bank credit, highlighting a significant gap in financing access.
The pact between Hassana, a state-backed investment entity with a focus on sustainable development and financial inclusion, and Franklin Templeton, a global asset management firm, aims to bridge this gap. By jointly exploring credit opportunities, the partnership intends to support businesses with growth potential that currently lack sufficient financing options. This move aligns with Saudi Arabia’s Vision 2030 objectives, which emphasise economic diversification and private sector empowerment.
Private credit markets have gained traction globally as investors seek higher yields amid low interest rate environments and increased regulatory scrutiny on banks. In Saudi Arabia, the appetite for private credit is also driven by an expanding pool of institutional capital looking for alternative investment avenues that can deliver stable returns and support economic development. Franklin Templeton’s expertise in managing alternative credit strategies complements Hassana’s local market insights, creating a synergy aimed at unlocking new funding channels.
Mid-sized companies, often described as the backbone of the economy, represent a crucial segment in Saudi Arabia’s growth narrative. Despite their scale and contribution, these firms frequently encounter structural financing constraints. Traditional banks tend to prioritise large corporate clients or small businesses with collateral-backed loans, leaving mid-sized businesses underserved. The collaboration is set to focus on tailored credit solutions that address this financing mismatch, potentially involving direct lending, structured credit products, and credit funds specifically designed for the Saudi market.
This initiative also responds to the kingdom’s wider effort to develop its capital markets and improve financial inclusion. Saudi Arabia has been enhancing its regulatory framework to facilitate private credit investments, including reforms to improve transparency, governance, and investor protection. Recent policy measures have aimed to attract foreign institutional investors and increase private sector participation in financing. The new partnership will likely engage with these evolving frameworks to structure investments that meet regulatory standards while addressing market needs.
The memorandum outlines plans for joint research, market analysis, and potential investment vehicles that could be deployed to scale credit provision. Both parties emphasise a commitment to sustainable finance, integrating environmental, social, and governance criteria into credit assessments. This approach reflects growing global and regional expectations for responsible investment, and aligns with Saudi Arabia’s commitments to sustainability under its national development agenda.
Experts highlight that the partnership marks a pivotal moment for Saudi Arabia’s financial sector. Private credit has historically been underdeveloped in the Gulf Cooperation Council region, but growing demand from corporates and investors is catalysing new products and market segments. The engagement of a global player like Franklin Templeton signals increasing confidence in the kingdom’s private credit potential and may encourage other international asset managers to explore opportunities.
Saudi regulators have expressed support for expanding non-bank financing as a means to reduce credit concentration risk and foster economic resilience. By enabling more diverse funding sources, the private credit market can complement the banking sector and improve overall credit availability. This diversification is crucial for sustaining the growth of innovative sectors, including technology, healthcare, and industrial manufacturing, which require flexible financing arrangements often not suited to traditional bank lending.
Hassana’s role extends beyond capital provision; it acts as a catalyst to build infrastructure and expertise around private credit in the kingdom. By leveraging partnerships with experienced global firms, it aims to transfer knowledge and develop local capabilities in underwriting, risk management, and credit analytics. This capacity building is essential for creating a sustainable private credit ecosystem that can support long-term economic transformation.
The partnership’s timing is notable amid ongoing developments in Saudi Arabia’s financial markets, including expansion of the Tadawul stock exchange and increasing integration with global capital markets. The kingdom has also promoted initiatives to deepen its debt markets, including sukuk and corporate bonds, but private credit offers complementary benefits, such as customised deal structures and closer borrower-lender relationships.
While challenges remain, such as building market confidence and addressing information asymmetry, the alliance between Hassana and Franklin Templeton represents a strategic step toward overcoming these barriers. The move underscores a shift in financing paradigms within the kingdom, where institutional capital is progressively mobilised to support a broader range of businesses and stimulate economic dynamism.
Investors and market watchers will closely monitor how this partnership shapes Saudi Arabia’s private credit landscape. Its success could set a precedent for similar collaborations and broaden the spectrum of financial services available to the kingdom’s burgeoning private sector. By expanding the availability of credit tailored to mid-sized companies, the initiative has the potential to contribute significantly to employment growth and economic diversification goals.
Topics
Spotlight