Saudi fund bets on private credit with $3bn plan amid Riyadh's efforts to diversify economy away from oil

Saudi Venture Capital (SVC), a state-backed investment firm, is revamping its $3 billion investment strategy to allocate more money into private credit funds, betting that the asset class will capture a larger share of business in the kingdom. The firm, which operates primarily as a fund of funds, plans to allocate half of its total investments to private credit and equity combined. This is an increase of about one third of its portfolio allocation last year. The rest of its investments will continue to support venture funding, the company told Bloomberg. What is the rationale behind this change? According to CEO Nabeel Koshak, this portfolio redesign strategy is based on the “evolution and growth of the ecosystem”. A key driver is the nascent stage of private credit in Saudi Arabia. Koshak noted that SVC intends to create awareness about how private credit complements existing financing options by filling the gap in SME financing. Companies in Saudi Arabia, including small and medium-sized enterprises, are increasingly turning to new sources of financing as tighter liquidity conditions make it more difficult to secure traditional capital through banks, according to Koshak. Broader economic context and regional growth The SVC chief spoke on Wednesday ahead of the Private Capital Forum in Riyadh, where the fund will gather investors and policymakers for discussions on regulatory challenges and funding gaps in the market. The increased need for diversified financing has become acute in Saudi Arabia as the kingdom tries to boost spending under Crown Prince Mohammed bin Salman’s plan to diversify the economy away from oil. This diversification aims to establish the kingdom as a center for entrepreneurship, finance and investment. The focus on private credit and equity is also reflected across the wider Middle East Gulf region, where demand for these asset classes is growing, Bloomberg reported. Other major players, such as the Public Investment Fund (PIF) are also entering the private credit space, anchoring new funds from Goldman Sachs Asset Management focused on the Gulf. Venture debt is also showing signs of growth, with firms such as Stride Ventures deploying capital in the kingdom. SVC’s Recent Activity Launched in 2018, SVC has a mandate to invest $3 billion by 2030 to develop the financing ecosystem for startups and SMEs. The CEO indicated that the firm intends to maintain its recent investment rate through 2026. He invested about $300 million every year. The firm recently began pivoting into private credit and venture debt, with investments in Partners for Growth and Ruya Partners. It has also backed PE giants including General Atlantic and VC funds such as Global Ventures, Bloomberg reports.