Asset-Backed Finance in the UAE innovation economy

Why this inflection point demands a new credit architecture

The second in a thought-leadership series by Channel Capital, in collaboration with academics and students, on the role of finance in the innovation economy

Dr Walter Gontarek, Channel and Hadi Hassan, Bayes Business School

Introduction: A new credit paradigm for the Gulf

The hostilities in the Gulf region have not resolved the structural tensions reshaping the Gulf’s financial landscape. They have, however, crystallised something that was already becoming clear to the most sophisticated institutional investors in the region: we see the era of oil-anchored, bank-intermediated credit giving way to something more diversified, more resilient, and more aligned with both Islamic principles and modern capital allocation.

The United Arab Emirates, home to ADGM, DIFC, and one of the world’s most ambitious AI infrastructure programmes, sits at the epicentre of this transition.

The country’s leadership has committed to making the UAE a global hub for artificial intelligence, fintech, and digital economy growth. It is investing in the world’s first purpose-built AI city. It is home to G42, one of the world’s leading sovereign AI platforms. And it is the anchor market for a generation of asset-light, data-rich businesses that need credit, but cannot access it through traditional channels.

This opportunity is unfolding against a significant global backdrop.

Goldman Sachs’ April 2026 Top of Mind report, “Cracks in Private Credit,” documents the pressures mounting across the $1.8 trillion global private credit market: high-profile defaults, concerns about inflated valuations, and a concentration of risk in software-sector lending. Non-traded business development companies (BDCs), the primary vehicle for retail investors accessing US private credit, faced quarterly redemption requests of 12% in Q1 2026, with gross inflows falling more than 50% below their prior run-rate. In the same week, investors in Blue Owl Capital’s BDC tendered less than 1% of available shares to activist buyer Saba Capital, even when offered an exit at a greater-than-20% discount to NAV, a striking signal that investors in well-managed, collateralised credit retain long-run conviction. Channel Capital’s GCC asset-backed finance strategy is structurally uncorrelated to these pressures. It is collateralised by short-duration trade and digital receivables, not long-dated software loans, and is anchored in the real economy of Gulf commerce and innovation.

The UAE’s ambition is not merely to adopt AI, it is to embed it into the foundations of a post-oil economy. That economy needs a credit architecture to match.

Hadi Hassan

The funding gap: where banks are slow to follow

As of publication, Channel Capital has deployed in excess of $1.5 billion across the UAE lending market, building deep origination relationships with fintech platforms, e-commerce enablers, and technology-driven lenders. That experience has confirmed what market data increasingly shows: the UAE’s innovation economy faces a structural funding gap estimated at over $250 billion across the broader GCC region. Channel’s participation, in the summer of 2026, in Beehive’s SME lending programme is one example. Channel Capital’s Beehive investment unlocks further support for GCC innovation firms seeking non-dilutive capital.

The gap is not simply a function of risk aversion. It reflects the mismatch between traditional bank credit frameworks, built around collateral, profitability history, and IFRS-compliant reporting, and the balance sheets of the companies that are driving the UAE’s economic transformation. Fintech platforms, AI software companies, and digital marketplace businesses are asset-light and cash-flow rich. They are precisely the credits that asset-backed finance is designed to serve.

• UAE SME financing penetration remains below 7% of GDP, versus 20%+ in comparable developed markets
• Non-bank lending as a share of total credit stands at approximately 3% in the GCC, versus 40%+ in the US
• The post-conflict reorientation of regional capital is accelerating demand for domestically structured, Sharia-compliant alternatives
• The CMA and FSRA are actively expanding regulatory frameworks for private credit fund structures

FlapKap and the proof of concept

In 2025, Channel Capital closed a landmark transaction that was recognised with the ABS Deal of the Year award: a structured asset-backed facility for FlapKap, a UAE-headquartered revenue-based financing platform serving merchants and SMEs across the Gulf.

The FlapKap transaction demonstrated several notable capabilities that we believe define Channel’s competitive position in this market. First, it demonstrated the ability to structure a compliant, ringfenced asset-backed facility around digital receivables: assets that typically have no natural home in a traditional bank lending framework. Second, it provided the liquidity certainty that a high-growth fintech requires to scale its portfolio without equity dilution. Third, it generated returns commensurate with the credit risk, not the technology risk,  of the underlying assets.

Channel’s UAE-based team members, together with a Board Advisory Group with deep regional relationships across ADGM, DIFC, and Saudi Arabia’s CMA-regulated market, provide the institutional credibility and on-the-ground origination capability that can help to replicate this model at scale.

The Sharia imperative: principle and pragmatism

For a significant proportion of GCC institutional capital, whether sovereign wealth funds, family offices, or pension-equivalent vehicles, Sharia compliance is not a preference. It is a fiduciary requirement. Yet the market for Sharia-compliant private credit has historically been thin, dominated by commodity Murabaha structures that tend to be administratively complex and usually offer limited yield differentiation.

Channel’s Corniche Sharia Series aims to address this gap directly. Backed by three Fatwas from Khalij Islamic and structured via a Cayman-domiciled Sharia feeder into the FCA-regulated Corniche ABF Fund, the Series offers GCC institutional investors genuine Islamic private credit exposure – not a synthetic wrapper, but an end-to-end Sharia-compliant structure across origination, asset selection, and income distribution.

Three Fatwas from Khalij Islamic. A Cayman-domiciled feeder. FCA regulation at the fund level. This is institutional-grade Sharia compliance – not a workaround.

AI, technology, and the future of ABF underwriting

Channel’s proprietary Copperfield/CREST AI platform integrates machine-learning driven underwriting with real-time portfolio monitoring, enabling credit decisions that are faster, more granular, and more data-rich than anything a traditional credit committee process can deliver. This is not a marginal improvement. We believe that in a market defined by fast-moving digital receivables, invoice flows, and revenue streams, the ability to monitor and act on collateral performance in real time is a structural underwriting advantage.

In the context of the UAE’s AI-first economic strategy, where the government has mandated that AI is embedded across financial services, logistics, and public infrastructure, we believe this capability positions Channel not merely as a credit provider but as a technology-enabled financial infrastructure partner for the next generation of Gulf innovation companies.

• Automated transaction monitoring across multi-jurisdiction portfolios
• AI-assisted covenant surveillance and early warning systems
• Data-driven origination scoring for fintech and digital-economy borrowers
• Real-time NAV transparency for institutional investors

The post-conflict opportunity

The 2026 Iran-US conflict created a period of acute uncertainty for Gulf capital markets. Risk premiums widened. Infrastructure investment slowed. Some foreign capital temporarily retreated. In retrospect, that period also created a structural opportunity: the region’s long-term commitment to economic diversification was not only reaffirmed,  it was accelerated.

The UAE’s leadership has responded to the conflict period with a renewed emphasis on domestic capital formation, non-oil revenue diversification, and the deepening of local capital markets. For private credit managers with an established origination franchise, a Sharia-compliant product suite, and a technology platform that can scale, this is an ideal environment in which to deploy.

Our view? Channel Capital’s track record across $1.5bn of UAE lending, its award-winning structured finance execution, and its Sharia-compliant product architecture place it in a uniquely strong position to capture the rebound in innovation economy credit demand.

Conclusion

The UAE innovation economy is not waiting for traditional bank credit to catch up. Its fintech platforms are growing. Its AI companies are scaling. Its digital merchants are generating receivables that can be structured, securitised, and returned to institutional investors as high-quality, short-duration, asset-backed income.

Channel Capital Advisors is the manager that has done this: at scale, with institutional rigour, with Sharia compliance, and with an AI-powered underwriting platform built for this specific market.

Our 2025 ABS Deal of the Year award is not merely a credential, it is irrefutable proof of our capability.

Sources:

Gulf News: Stargate UAE: OpenAI to build world’s largest AI data centre in Abu Dhabi (May 2025), Capera Insights, The UAE’s $250 Billion SME Funding Gap. And What’s Closing It (May 2026)

This article has been prepared by Channel Capital Advisors LLP and Hadi Hassan for information purposes only. Channel Capital Advisors LLP is authorised and regulated by the Financial Conduct Authority. This does not constitute investment advice.