Erad, the Riyadh-headquartered alternative financing platform for SMEs partnered with Jefferies, alongside co-investment from Channel Capital, to secure $125million in a credit deal to accelerate embedded finance solutions across the GCC.
According to Salem Abu-Hammour, Co-Founder of Erad: “Our partnership with Jefferies represents a transformative moment for SME financing in the region. The support from the regulators, Jefferies and Channel Capital, demonstrates the strategic importance of alternative finance in supporting the Kingdom’s goal of SME growth.”
Co-Partnership: Sharia Compliant
Channel’s entry into the Kingdom is the first for the investment firm.
The co-partnership supports Erad’s support of SMEs to access Sharia-compliant working-capital solutions for logistics, manufacturing, distribution, and real-estate services.
SME Credit Gap Significant for GCC SMEs:
SMEs represent the backbone of the GCC’s diversification efforts, contributing up to 50% of regional GDP, whilst employing two-thirds of the workforce.
However, the GCC has an estimated $250bn SME credit gap. Over 80% of GCC bank lending flows to government entities and large corporates because of:
- Asymmetric Information: lack of financial analysis and forecasting limits credit score, raising collateral. Over 80% of GCC bank lending flows to government entities and large corporates.
- Institutional Bias: banks favour established corporations or government-tied entities.
- Bureaucracy: delays in processing for loans outweigh reactive business needs.
In turn, credit streams help fill a black hole for future investment potential in SME suppliers and firms operating in healthcare, retail, and F&B across KSA and the UAE.
Together this investment unlocks future growth avenues for local SMEs across the supply chain: a key credit line for GCC SMEs.
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