Saudi Banks Support to Small and Medium Enterprises

The support of Saudi Banks to the financing of small and medium-sized enterprises and the expenditures of the government played very important role in the prosperity of the Saudi Arabian economy.

Government spending for the past years has allowed the different banks in Saudi to retain good profits in 2012, and their financial success is projected to increase more through lending to small and medium-sized businesses.

Actually, the important role of the banks in Saudi will be one of the main topics for discussions during the Saudi International SME Forum this coming May 28 in Riyadh.

Saudi Banks - Bank Support

The forum is being organized by the Saudi Credit & Savings Bank together with the Saudi Industrial Dev. Fund-Kafalah Program, in cooperation with the Al-lktissad Wal-Aamal Group.

Since the beginning of Kafalah program in 2006 up to the first quarter of 2013, the program has adopted 3,159 SME Kafalah contracts with a total value of SR 2.561 million. On the other hand, participating local banks have offered loans amounting to SR 5.284 million.

Some of the banks in Saudi include Saudi Credit and Saving Bank, Alinma Bank, Bank of al Jazira, Saudi Investment Bank, Samba Financial Group, Banque Saudi Frnsi, Saudi Hollandi Bank, Islamic Development Bank, T.C. ZIRAAT Bankasi A.S., Bank Albilad, International Bank of Bahrain, The Saudi British Bank, Al-Rajhi Bank, Arab National Bank, and Riyadh Bank.

The participating local banks to the program have funded SR 1.768 million in 2012 compared to SR 1.283 million in 2011. This increase of thirty eight percent is a proof that banks truly played an important role in the development and expansion of SMEs in Saudi Arabia.

Saudi Banks and the Kafalah Program

The establishment of Kafalah Program and its success has enhanced the important role that Saudi Banks play with regard to the existence of SMEs in Saudi.

What is Kafalah Program? This program is cooperation between the Saudi banks and the Ministry of Finance as represented by the Saudi Industrial Development Fund or SIDF that was created mainly to encourage financing to Small and Medium Enterprises or SMEs within the Saudi Arabian Kingdom.

Therefore, through this program; customers can avail up to SR 2 million from the bank and a guarantee from SIDF-Kafalah Program to cover up to eighty percent of the financing amount to the bank.

Among the objectives of the program include:

  1. Assist SMEs in getting Islamic finance for their expansion and development projects.
  2. Help the SMEs in creating innovative and high quality products and services.
  3. Develop and participate in SMEs programs that will uplift the local economy.
  4. Promote more jobs by providing trainings and hiring Saudi Arabia citizens.
  5. Encourage integration with corporate sector and close relationships with financial institutions of the different SMEs.

Growth in Saudi Banks Deposits

Saudi Banks - Bank Growth

It has been recently reported that the total deposits of Saudi Banks have increased for the past two years and the bulk of the volume increase was attributed to call deposits.

Call deposits are investment accounts that carry interests, which allow an individual to withdraw his funds from the investment account without paying any penalty for early withdrawal.

This type of account is more flexible and less burdensome especially for small and medium enterprise owners.

Currently, Al-Rajhi Bank has the most call deposits in the amount of SR 200 billion. Next is Bank Albilad and Samba Financial Group is third.

Since banks in Saudi are one of the main sources in the expansion of SMEs, growth in deposits in these banks will surely bring about prosperity to the Kingdom of Saudi.