Financing Businesses through Private Credit

Mohanned Alfayez

02 April, 2023

We are thrilled to announce the launch of our new Shariah-Compliant fund, Merak Direct Lending Fund (“MDLF”), which complies with the recent regulations set by the Capital Market Authority for direct financing funds. This fund introduces a new asset class to the local market that offers investors an entry point into the private credit market. We achieve this through building a diversified portfolio of loans to middle-market businesses, providing investors access to risk-adjusted returns, periodic distributions, and downside protection.

The investment strategy focuses on identifying middle-market tech, and tech-enabled, businesses; while also seizing opportunities for non-tech sectors with financially sound standing and outstanding growth. We manage risk by diversifying the portfolio across multiple sectors, geographies, and borrowers. 

The fund is committed to providing borrowers with a set of services that go beyond simply providing access to capital. Merak’s approach is tailored to meet the specific needs of each borrower, with a focus on providing financing solutions and repayment plans that are aligned with the borrower’s projected cash flow in a quick and efficient manner. This ensures that the borrower can meet their financial obligations while also having the necessary capital to invest in their business.

Our role goes beyond providing capital alone. With a deep understanding of the market and a proven track record of success, our partners can offer valuable insights and guidance that can help our borrowers succeed. Borrowers can benefit from Merak’s team through market insights and business-related services; some of which include advisory services, strategic planning, operational improvements, and market analysis. In urgent cases, borrowers can also rely on the support of our investment team and utilize Merak’s proprietary tools to assess new business opportunities or market strategies. We understand that sometimes unexpected opportunities or challenges arise, and we are committed to providing our borrowers with the resources they need to navigate these situations. Additionally, our proprietary tools enable our borrowers to conduct in-depth analysis and gain valuable insights into new business opportunities or market strategies, empowering them to make informed decisions that can help them succeed.

Additionally, our fund is managed by a seasoned board of directors with extensive knowledge and experience in both the lending and investing landscapes. Furthermore, a dedicated team of professionals are in place to ensure establishing and managing a sound and profitable portfolio for investors. By employing this diversified experience with in-depth understanding in technology, we are well-positioned to provide investors with unique opportunities and ensure borrowing businesses receive innovative and suitable financing solutions.

MDLF has an investment cycle of three years. The fund provides distributions throughout the term of the investment, offering investors a periodic stream of returns. The fund is expected to hold a portfolio of over 40 loans, providing a diversified mix of investments across various sectors and geographies in the Kingdom. The fund aims to generate a net internal rate of return (Net IRR) above 12%.

Backed by comprehensive market research and extensive market outlook, the decision to establish Merak Direct Lending Fund was not taken lightly. The process involved an in-depth analysis of the private credit market globally, mainly consisting of its history, growth, development, and historical performance throughout different economic cycles. Globally, private credit investments can be less volatile than equities, and have lower correlation with the stock market.

Moreover, we conducted a thorough assessment of the local credit market ecosystem, which enabled us to identify a significant funding gap for SMEs, indicating that there is a largely unmet need for financing in this segment; which has been a persistent issue in the region.  The launch of Merak Direct Lending Fund marks a significant milestone for Merak Capital and for the local credit market, offering investors an opportunity to capitalize on a lucrative asset class, while also supporting the growth of SMEs in the Kingdom.


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Merak Capital . All rights reserved ©