Private Credit and SME Financing in Saudi Arabia: A Risk-Adjusted Framework for Fund-to-NBFI Allocation

This research paper analyzes the structural SME financing gap in Saudi Arabia, estimated to exceed SAR 300 billion, and evaluates private credit as a scalable solution to address this challenge. The study introduces a risk-adjusted framework for capital allocation, comparing direct SME lending with indirect exposure through Non-Bank Financial Institutions (NBFIs). Using a combination of market analysis, comparative modeling, and scenario-based evaluation, the paper demonstrates that indirect lending via NBFIs provides superior diversification, faster capital deployment, and more stable risk-adjusted returns. The findings contribute to ongoing discussions on financial sector development under Vision 2030 and offer practical insights for institutional investors, policymakers, and capital market participants.