Global عربي
KSA عربي
Global عربي
For several years, private debt has been an asset class that has been associated with investors who can write big checks, deal through a specialist manager and get access to opportunities that are beyond the reach of the average investor's portfolio.
The private credit has been a way for family offices and institutional investors to generate income and diversify their portfolios by lending to businesses outside the public markets.
In the UAE, it has traditionally been harder for individual investors to gain access.
This barrier is in the process of changing. The asset class has become a major component of corporate finance, expanding from a relatively niche market to a global category valued at more than $2 trillion and BlackRock is projecting, it will be at over $4.5 trillion by 2030.
Its 2026 forecast also signals a rise in the importance of private credit as businesses look for financing sources other than the public debt market and banks.
This change is especially important in the UAE. The country's economy is increasingly driven by private businesses and SMEs, creating an ongoing need for flexible financing. According to the UAE Ministry of Economy, the UAE has over 557,000 SMEs (with an official target to reach 1 Million by 2030) with non-oil activities contributing 63.5% to GDP in Q1 2026.
This establishes an interesting relationship for an investor, as;
The issue now is no longer just whether private debt is the sole responsibility of the institutions. It's whether UAE investors can now be exposed to the same opportunity, at an appropriate level for their own portfolios.
More importantly, what does “institutional-grade” really mean when you are investing your own money?
There's a segment of the global credit market that rarely gets the same attention as stocks, bonds or real estate. But the world's private credit market is already valued at about $2.1 trillion and BlackRock projects it will grow by more than double to $4.5 trillion by 2030.
The future outlook for 2026 is positive, with businesses increasingly seeking financing options outside the traditional banking system and public markets.
The reason for that growth is fairly simple:
Over the past two decades, tighter post-financial-crisis regulation and changes in bank balance-sheet economics have made some loans less attractive for banks, particularly to middle-market businesses.
Meanwhile, public credit markets have been expanding to provide larger borrowers. This has created a financing invalid and private lenders have taken advantage of it.
This change is significant because private lenders are able to offer financing in a different manner. They don't have to sell a standard loan but can discuss any pricing, repayment conditions, security and protection with the borrower.
This can be beneficial to businesses in terms of flexibility in access to capital. It provides an opportunity for investors to make an income by lending to businesses directly.
This opportunity has grown to be a very big one as evidenced by this scale of the market. In recent years, overall credit growth has been boosted by private credit and the IMF estimated that the global direct-lending universe in 2026 was about $2 trillion.
Thus, private debt is no longer a niche area of alternative investments. It has become an important factor in the process of capital raising by businesses. For UAE investors, the more interesting question is how to gain access to that market without having an institutional-sized portfolio.
The basic idea of a private debt fund is to bring together funds from investors and lend it to businesses. The fund lends money to a company rather than purchasing its stock and hoping it will appreciate and then collects interest on the loan.
In an equity investment, an investor becomes a shareholder of a company and relies on the value of the company in the future. In contrast, private debt investor’s act as lenders in transaction. The fund lends the money to the borrower and receives contractual income. This income could be from interest, fees or from a predetermined profit rate in a Shariah-compliant arrangement, depending on the structure.
The demand to the investor is fairly simple: the investor gives the money, receives income and is paid back the money at the agreed terms. The return is not assured but it depends on the quality of the borrowers and the credit risk management ability of the fund.
Direct lending is one of the most frequently used types of private debt. A private credit fund could finance a company directly rather than taking a loan from a traditional bank or selling a public bond.
This provides the lender with more control over the terms of the financing. The fund normally arranges the most significant conditions with the borrower, which include:
For example, a fund may provide a secured loan to an established company that needs capital to expand its operations. The borrower gets the money it requires and the fund gets a predetermined return over the duration of the loan.
The fund then is responsible for managing a pool of such loans instead of just one borrower. For investors, this portfolio strategy can offer exposure to several businesses and income streams in a single investment.
The idea of lending to businesses is not new. However, the ones who can now benefit from these opportunities has changed.
In the past, private debt investments were primarily managed by institutional managers, private banks, wealth advisers and specialized investment networks. Other funds had minimum investment requirements, especially with respect to institutional share classes.
For instance, the Direct Private Credit Fund has a one million dollar minimum investment for its Class 1 shares in a 2026 SEC filing, with other share classes having lower minimums.
There may be a further hurdle in terms of who is allowed to become an investor. Many private market offerings in the United States are restricted to “accredited investors” which is often defined by income, net worth or other regulatory requirements.
The key takeaway for HNW investors is that private debt has been around before. Traditionally that access was based on capital size, investor qualification and proper investment avenues.
That's where things are starting to shift in the market. The discussion is now shifting from “Can an individual investor gain access to private credit?” to “How should private credit be incorporated into an investor's portfolio?” as the market for private credit opens up on newer investment platforms and fund structures.
Over the last decade, the UAE has been developing an economy that relies heavily on private enterprise. As this business base continues to expand then there is a need for flexible sources of capital.
This provides an interesting option for private debt. According to the UAE Ministry of Economy and Tourism, there are approximately 1.33 million SMEs, accounting for nearly 95% of all companies and contributing approximately 63% of GDP.
They are found in diverse industries including trade, manufacturing, technology, professional services and construction. During the development period many require working capital, expansion, acquisition or development of new projects.
This does not imply that UAE banks are not giving loans to SMEs. They remain an important source of business finance. The problem is more related to access, structure and flexibility.
As the business expands, it is possible that it might require funds for a deal that falls outside the scope of a conventional banking arrangement. It could require a different repayment mechanism, a more rapid timeframe for the execution or financing based upon an asset or a business plan. This is where private lenders can fill in the gaps of the traditional banking system.
In the case of direct lending, a fund can evaluate the borrower and structure the financing based on the evaluation. The lender can consider factors such as:
For the business, this can offer an additional source of capital. While for investors, it is an opportunity to generate income from the financing of existing private companies.
This is significant due to the scale of the SME economy. The UAE's SME sector, which accounts for almost 95% of the country's businesses has 1.33 million small enterprises, which means that even a comparatively modest move towards alternative forms of financing that can generate a viable market for private lenders.
The other story in the UAE is regulation. The financial centres of the country have been working on frameworks designed explicitly for alternative investment strategies rather than a corner of finance that is left undefined as private credit.
In Abu Dhabi Global Market (ADGM), the Financial Services Regulatory Authority (FSRA) has issued a Private Credit Funds Framework which enables credit facilities to be originated and participated in by private credit funds that meet certain criteria and provides requirements for aspects including risk management, diversification, credit assessment and valuation.
This is important because the traditional banking system is simply not enough to support a growing SME economy and investors require an appropriate framework in which alternative investments can function.
The UAE financial regulatory framework is strong and private debt has a clear role in the investment landscape, with a strong base of SMEs and ongoing demand for business capital.
Therefore, the opportunity is not just for UAE investors to gain access to a global asset class. It is concerned with exposure to business finance in a rapidly growing private sector economy.
Traditionally, individual investors have had limited access to private debt. It was not the idea itself that was always the challenge. It was about identifying opportunities, understanding the nature of the underlying businesses and possessing the necessary capital to engage in them.
Funding Souq is taking a different approach to the same concept. It is an online platform that lets investors see financing opportunities and invest in businesses through smaller individual investments rather than having to approach private companies or specialist fund managers directly.
The term “institutional-grade” should not just be a way to provide investors access to a private lending opportunity. In reality, it's about the depth of the credit assessment that is behind each investment.
With private debt, the access is only important if investors can see what lies behind the return. That's where the underwriter comes in.
The Funding Souq's credit assessment looks beyond a company's headline revenue while the platform states that it takes into account the company's financial situation, debts, credit history, investors and other external factors. It also includes a physical site visit and management discussions for relevant businesses.
From a practical perspective, the evaluation takes into account the following areas:
In reality, “institutional-grade” should include a credit risk assessment process before any capital is invested in that return rather than just a return offered.
This is where it becomes evident that there is a difference in access.
In the UAE, investors can currently start with AED 1,000 while retail investors are limited to AED 36,000 per business. According to Funding Souq, the annual deposit limit for investors who are not classified as Professional Investors is also AED 365,000.
That changes the economics of participation. An investor does not have to invest hundreds of thousands of dirhams to get some exposure. Instead, the smaller ticket may be broken up into several opportunities, depending on the platform's limits and risk assessment of the investor.
The key difference is that the amount of required exposure is no longer the same as the amount of exposure needed to create meaningful exposure.
The structure also plays a pivotal role for investors in UAE and the wider Gulf who seek returns reflective of Islamic finance.
According to Funding Souq, all of its investment and financing activities are Shariah compliant and that the Shariah Supervisory Board performs quarterly audits on a random sample of opportunities. It has also been endorsed by the subsidiary of Dubai Islamic Bank, Dar Al Sharia.
Instead of interest, investors are involved in financing arrangements that are based on a mutually agreed profit rate. This will enable investors to avail private-business financing without compromising the investment structure with respect to Shariah principles.
Therefore, the offer is not just about “small-ticket private debt” for the investor. It offers structured credit assessment, lower requirements and a Shariah-compliant investment framework all in one platform.
The investors who are familiar with investing in property, equities and bonds, private debt can appear appealing because the return is closely linked more with contractual payments than with day-to-day market prices. It's not just about the percentage that's important here.
However, the more important question is what the investor will actually earn, when it will be paid and what risks will be taken to earn it.
The returns from global private credit differ depending on strategy, quality of borrowers and fund structure. The BlackRock Private Credit Fund had an annualized return of 9.02% since inception as of July 2026 with a distribution rate of 9.05%.
In addition, BlackRock's more general analysis revealed that direct lending had provided higher average yields compared to leveraged loans and high-yield bonds over the past decade.
The UAE platform picture can be higher. As of now, investors can currently receive up to a 15% annual net yield on their investment at Funding Souq and the platform also reflects an IRR of up to 23% as monthly repayments can be reinvested.
These are returns that may or may not happen and actual performance is dependent on the underlying investments.
It's a significant difference. A net yield of 15% and an IRR of 23% are NOT two distinct returns on the same investment. The IRR considers the timing of cash flows and the impact of receiving repayments with a possible reinvestment opportunity.
The income comparison places private debt into perspective for a UAE HNW investor:
The UAE property can also generate capital appreciation while equities offer both dividends and price growth. Therefore, the figures should not be used as total-return comparisons.
The real attraction of private debt is that it offers different regular income flows and it has a shorter time horizon and less need for reliance upon public market price changes. The downside is that it comes with a credit risk and reduced liquidity.
From an investor's point of view, it's not just about chasing the number of highest numbers. It is a matter of comprehending how much net income is possible, how income is generated and what risks need to be taken to earn it.
The private debt can provide good income but that income is there because people are taking risks that cannot be eliminated just because they are negotiating it privately.
The more important question for an experienced investor is not about the risks of private debt but where these risks lie and whether they're worth the expected return.
The primary risk is that of the borrower. This can cause a business cash flow to drop, mean delayed payments or financial uncertainty for the business, which can damage their ability to pay back investors.
This is why underwriting is important. The financial statements, debt, credit history, ownership and repayment capacity all help determine the borrower, but none of these can ensure repayment.
According to Funding Souq, the investors may also lose part or all of their investment if a business fails to pay back. It is a process that involves collection and recovery when financing goes delinquent.
The liquidity is the second factor to take into consideration. A private-credit investment is typically not tradable on the open market like a listed share.
According to Funding Souq, the Investors are currently not able to withdraw from an investment prior to the maturity of the underlying finance contract.
This makes the investment period of time relevant. For instance, if an investor has AED 50,000 to invest, they should be able to make that capital stay invested for the duration of the investment period, and should not make any quick withdrawal.
The borrower isn't the only one who has to take the risk. An investor could diversify their investment into multiple businesses, have low borrower concentration and maintain a significant amount of exposure to one platform.
This is why a private-credit allocation needs to be part of a larger portfolio and not the only source of income. With private credit growing, concerns have been raised by regulators and the IMF about liquidity, leverage and interdependency.
These risks are a component of the cost of private debt for a sophisticated investor. The return isn't just the repayment of the loan. It's a reward for taking credit risk, investing capital for a specified time period and dealing with concentration.
For the HNW investor, private debt is not just a high-yield opportunity but should occupy a definite place in the larger portfolio. The goal is to increase income with an adequate amount of liquidity and diversification in other assets.
Private debt may serve as a satellite allocation to the main asset classes other than equities, real estate, cash and traditional fixed income. It enables investors to generate income on a contractual basis from private enterprises that does not rely on a single asset class.
For instance, a UAE Real Estate investor who has already been heavily exposed to the UAE real estate sector can shift their exposure to business financing through private debt instead of concentrating their investment in the property sector.
Both equity and private debt can continue to offer long-term growth as well as income and diversification.
This strategy aligns with the overall trend of private-market investment in 2026. BlackRock mentions the increasing trend of whole-portfolio strategies that integrate public and private assets and Morgan Stanley observes that institutional investors are still utilizing private credit as a source of income and diversification.
That mix matters because private debt comes with a time commitment. A practical portfolio can therefore combine:
The objective is not to make every part of the portfolio behave the same way. It is to give each allocation a clear purpose.
This is where it is important to have discipline. When a person repays the principal and profit, they can either take the money out or invest it in other ventures. Reinvestment may be compounding over time but it should be based on borrower quality, diversification and the investor's liquidity requirements.
When it comes to private debt, it's not just about the headline yield, it's about the portfolio. The best way to do this is not just to make money but to determine where the money fits into the investor's overall balance sheet.
Related reading: reinvesting profits Shariah-compliantly and diversification tips for Shariah compliance
The private debt is no longer confined to its traditional niche of financial institutions. The global market is growing and the ease of access through platforms like Funding Souq is making it possible for investors in the UAE to take part in private business financing without having to hold an institutional-sized portfolio.
While the opportunity is more readily available, the availability of an investment by itself does not constitute suitability. The quality of the opportunity remains dependent on the borrower quality, liquidity, diversification and structure of the investment.
The question for the HNW investor has now become “How should I invest in private debt?” rather than “Can I invest in private debt?” A well thought-out allocation can bring income and diversification in addition to stocks, real estate, cash and disciplined reinvestment can get the repayments to work.
In private debt, the benefit is not just that you have access to an institutional asset class but you know exactly how much to buy, what you're earning and what risks you are taking to earn those returns.
Read more: peer-to-peer lending in the UAE
This is an investment vehicle that pools capital from investors and uses it to provide financing to private businesses. This financing may be in the form of direct loans, loan participations or other investments in loans and income may be received from the underlying financing.
These funds can provide investors with exposure to business lending without having to negotiate and manage individual loans. However, the return here carries with it credit risk and liquidity risk, emphasizing the importance of borrowers quality and underwriting process.
This will vary based on the type of private debt investment and the regulatory framework. The difference is important because Exempt Funds and Qualified Investor Funds are offered to Professional Clients and not to the typical retail investor under ADGM's Private Credit Fund framework.
These limitations are due to the increased risks and the lower liquidity of private credit funds. Here, individual investors can still access private-business financing through platforms such as Funding Souq, which offers private credit opportunities to individual investors in the UAE.
There is no single rate for private debt, as this return is dependent on the borrower, financing arrangement, credit quality and investment vehicle.
This spread is reflected on the 2026 market data; BlackRock's Private Credit Fund had an annualized return of 9.02% since inception as of July 2026. These figures are not directly comparable with Funding Souq's platform target, which currently states a net yield of up to 15% per year.
In this case, both numbers are used as a guide to the investment and should not be used to predict future returns.
This access is provided through Funding Souq's credit assessment process, which takes into consideration financial position, existing debt, credit history, shareholders and other external data.
This process also involves business verification such as site visits and management meetings with relevant businesses. These checks enable individual investors to become involved in financing opportunities without becoming responsible for making a full credit judgment of the same type that the institutions make.
In this section, Funding Souq also declares that its investment and financing activities have been Shariah-compliant and are reviewed quarterly by its Shariah Supervisory Board.
This minimum can vary depending on the investment vehicle and platform but Funding Souq currently states a minimum investment of AED 1,000 for its UAE private credit opportunities.
The lower entry point provides investors with the opportunity to distribute their investment over several businesses instead of investing a significant portion of capital into a single business.
These investments are still capped by Funding Souq's limits, which include a maximum limit of AED 36,000 per business for retail investors in the UAE.
The smaller minimum here makes it easier for a person to access the investment but investors are still advised to take into account diversification, liquidity and borrower risk before investing.
Disclaimer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
