Jefferies Financial Group Inc. (JEF.US) has made its debut in Saudi Arabia's private credit sector by leading a $125 million financing deal for fintech startup Erad. According to a statement from the Riyadh-based company, the investment bank, along with co-investor Channel Capital, will provide an asset-backed scalable financing facility to help Erad expand lending to local SMEs through its platform.

With this transaction, Jefferies joins the ranks of major Wall Street investment banks actively pursuing private credit opportunities in Saudi Arabia and the broader Gulf region. Two months ago, Saudi BNPL unicorn Tamara secured a significant $2.4 billion asset-backed financing from multiple financial institutions including Goldman Sachs (GS.US) and Citigroup (C.US).

Until recently, private credit as an asset class remained virtually untapped in Saudi Arabia. However, as domestic banks face constraints from funding demands created by the country's massive economic reforms, Saudi businesses are increasingly turning to alternative financing channels. The SME sector shows particularly urgent demand for new funding sources, as these businesses often struggle to secure financing from local banks.

Erad noted that Gulf SMEs serve as the "backbone" of the region's economic diversification efforts, yet despite their critical role, they face a $250 billion financing gap that limits their growth potential. Salem Abu-Hammour, Erad's co-founder, stated that this deal "demonstrates the strategic importance of alternative financing in supporting Saudi SMEs' development goals."

The financing facility will help Erad meet growing funding demands from Gulf SMEs while expanding its services beyond traditional consumer sectors into manufacturing, logistics, distribution, and real estate services. Earlier this year, Erad raised $33 million in a debt financing round led by Stride Ventures.

For Jefferies, this marks its first completed asset-backed financing transaction in Saudi Arabia and further expands its market presence in the kingdom. The New York-based investment bank has been actively growing its Middle East operations in recent years.