JEDDAH: Private capital financing in the Gulf region has surged, reaching $54.8 billion between 2020 and 2024, a significant increase from the $10.4 billion raised in the previous five years, according to a new report.
S&P Global’s latest findings suggest that this upward trend is expected to continue, driven by companies seeking alternatives to traditional bank funding.
As more businesses underserved by banks turn to private financing, the region is set for further growth in private capital over the coming years.
The rise in interest from private capital providers is another key factor contributing to this trend. Historically, companies in the Gulf region have relied on banks, bonds, and sukuk to meet their financing needs.
The S&P report said: “Our analysis of private financing transactions shows that private financiers have expanded their reach over time to provide funding to more mature and established companies, not just those at early development stages. Established companies received 79 percent of private financings in December 2024, up from 31 percent in 2015.”
It added that although these established firms could have easily secured the necessary funding through banks or capital markets, they opted for private financings, which offer faster or more streamlined execution, greater flexibility in terms, or more competitive pricing.
The number of transactions that were financed with private capital peaked at $20.4 billion in 2023, compared with $1.3 billion in 2015, the document noted.
This shift mirrors global trends, with the Middle East emerging as a key growth area for private capital in 2025. Government initiatives and sector reforms are driving this development, positioning private equity and venture capital as leading investment opportunities.
This transition is further exemplified by a rise in regional startup funding, marking a 92 percent increase in capital raised in November alone. These factors are expected to continue driving the growth in private capital financings across the region in the coming years.
The agency emphasized that the sharp decline over 2024 primarily resulted from improving financing conditions in local banking sectors, bond and sukuk markets, and the decline in interest rates. “Even so, the number of transactions in 2024 was still 2.7 times higher than in 2015, which is indicative of the strong fundamentals that underpin the increase in private capital financings,” said the report.
The analysis revealed that GCC issuers, including governments, raised $3.5 trillion over the past decade. It added that bond issuances, which accounted for 51 percent of the total amount raised in 2024, constituted the preferred method of financing, followed by financing from banks, which contributed 26 percent.
“Three other asset classes experienced a significant increase in GCC issuers’ funding mix: Sukuk issuances accounted for 19 percent of the amount raised in 2024, equity capital market transactions — such as IPOs— for 6 percent, and private capital financings for 3 percent,” the study said.
S&P noted that investments were largely concentrated in the most significant deals. Over the past decade, the top 10 transactions represented around 80 percent of the total annual volume of private capital financings.
The agency does not anticipate private capital challenging the role of banks in the GCC region, as the overall volume of private financings remains relatively small.
On the demand side, the report added, private capital financings help early-stage firms become bankable, fueling growth opportunities within the financial ecosystem. Banks are often hesitant to lend to such companies without external support or guarantees.
Regarding supply, regional private capital providers, including sovereign wealth funds, will diversify their geographic exposure to reduce reliance on a single economy, the report said, adding: “GCC investors will remain on the radar of large companies that aim to raise money outside of the traditional banking system or capital markets, especially when interest rates are high.”
