Published 2026-04-10 · Last updated 2026-04-24 · By Hemant Agarwal, Founder of GCI
GCC private credit allocations have grown materially since 2022. The story is familiar: banks retrenched post-2020, family offices and sovereigns accumulated cash, and the yield gap between UAE bank deposits (3-5 percent) and direct lending (8-14 percent) is wide enough to draw capital.
What works in GCC private credit
Asset-backed lending against real estate. 50-65 percent LTV on prime Dubai or Abu Dhabi real estate. Legally enforceable, well-established, lenders have a well-understood recovery path through DIFC or ADGM courts or mainland civil courts. Spreads 4-7 percent over SOFR.
Trade finance against documentary credits. Particularly in Jebel Ali logistics and Saudi industrial corridors. Short tenor, self-liquidating, bank-level risk. Spreads compressed but volumes large.
Direct lending to owner-operated businesses with strong cash flow. AED 5-50M unsecured or lightly secured lending to profitable GCC SMEs. Terms 3-5 years, coupons 10-14 percent. Requires real underwriting on EBITDA quality and founder character.
Mezzanine or preferred equity in growth businesses. Less common, more bespoke. Often alongside PE equity. Coupons plus warrants.
What does not work
Cash flow lending to thinly capitalised UAE trading businesses. Recovery is hard, receivable quality is variable, trading business cash conversion cycles can stretch without warning. Post-pandemic default rates in this segment ran higher than expected.
Unsecured lending to Saudi family businesses without formal financials. The lending may look good on paper; enforcement when the family decides not to pay is notoriously difficult without strong local counsel and local relationships.
Second-lien or subordinated positions without control rights. In GCC restructurings, subordinated lenders have weaker recoveries than in developed markets. Structure with enforceable covenant packages and step-in rights or do not structure at all.
Crypto-backed or digital-asset-backed lending. Even with collateral, volatility and liquidation mechanics in the GCC are immature. DIFC and ADGM have frameworks but the operational infrastructure is still developing.
Five underwriting checks we run on every private credit deal
Cash conversion cycle. Actual days receivable, days inventory, days payable. GCC SMEs often have stressed working capital that is not visible in year-end financials.
Bank relationship diligence. Where does the borrower bank, what facilities does it already have, what is the history of utilisation. Bankers talk. A borrower whose primary bank is reducing exposure is telling you something.
Personal guarantee quality. Most GCC SME lending includes a founder personal guarantee. Assess the guarantor's actual net worth and enforceability. Guarantees collapse when the guarantor has offshore structures you cannot reach.
Industry cyclicality and seasonality. Construction, trading, seasonal retail, tourism all have cycles that impact debt service capacity.
Covenant package. Financial covenants (DSCR, leverage, liquidity), information covenants (monthly reporting), control covenants (negative pledges, dividend restrictions). Weak covenants in the GCC often mean the deal does not really exist as a credit product.
How GCI screens private credit deals
Private credit is a core GCI screening category. Our Conviction Engine applies the same 5-stage pipeline with credit-specific variations: Stage 1 extracts the credit structure, Stage 2 maps the cash flow and collateral chains, Stage 3 surfaces the enforcement path, Stage 4 pressure-tests default scenarios, Stage 5 produces a verdict with explicit covenant recommendations.
Pressure-test a live deal with the GCI Conviction Engine
Get a full Conviction Report with a PROCEED, CONDITIONS, or AVOID verdict in 3-5 business days.