RIYADH: Credit facilities provided to micro, small, and medium enterprises in Saudi Arabia saw an 18 percent annual rise in the third quarter of 2023, according to the latest figures.
Data from the Kingdom’s central bank, known as SAMA, showed borrowing lines allocation to this sector reached a total of SR268.57 billion ($71.61 billion) in the three months to October 2023, showing a rise from SR228.03 billion in the same period of the previous year.
This increase is attributed to government initiatives aimed at providing support to these firms.
Given its pivotal role in the economy, contributing to employment, innovation, and diversification, the small business sector has experienced notable growth in recent years.
Consequently, the SME General Authority, also known as Monsha’at, has introduced various initiatives to foster the development of this area in the Kingdom.
Key initiatives include the reimbursement of taxes paid by SMEs to the government, the introduction of the Kafalah program to mitigate risks in investments in the sector, providing indirect funding of $426 million to banks for supporting small businesses at reduced costs, and the initiation of the Saudi Venture Capital program, which invests in funds targeting high-growth potential startups.
The Guaranteed Financing Program, launched in 2020 by SAMA in cooperation with Kafalah, guarantees 95 percent of the value of financing granted by banks and companies according to the approved mechanisms within the Kafala program, with the aim of providing additional support and enhancing the creditworthiness of micro-enterprises.
As per the most recent data from Kafalah, the cumulative guarantees extended to SMEs in the third quarter of 2023 amounted to SR60.95 billion. Among these guarantees, the economic activity dominating the largest share was wholesale and retail trade, along with the repair of motor vehicles and motorcycles, comprising 34 percent during this period. Construction followed closely, constituting 26 percent of the total guarantees.
FASTFACT
Data from the Kingdom’s central bank, known as SAMA, showed borrowing lines allocation to this sector reached a total of SR268.57 billion ($71.61 billion) in the three months to October 2023, showing a rise from SR228.03 billion in the same period of the previous year.
Monsha’at played a key role in the establishment of a national SME Bank in 2021. The primary aim of the bank is to align with the goals of the Kingdom’s Vision 2030 economic diversification initiative, specifically by increasing the sector’s contribution to gross domestic product to 35 percent by 2030. Furthermore, the bank is committed to elevating the volume of financing directed to SMEs, targeting 20 percent of the total loan portfolio.
While credit facilities granted to medium enterprises comprised the majority at 59 percent in the third quarter of 2023, the most substantial growth within this category was witnessed by micro companies, experiencing a significant 35 percent increase compared to the same period last year, totaling SR24 billion.
Credit provided to small enterprises grew by 25 percent, reaching a total of SR85.92 billion, while credit to medium enterprises increased by 12 percent, totaling SR158.62 billion.
Micro enterprises are characterized by revenues up to SR3 million and a workforce of up to 5 full-time employees. Small enterprises, on the other hand, exhibit revenues ranging from SR3 million to SR40 million, accompanied by up to 49 full-time workers. In contrast, medium enterprises have revenues falling within the range of SR40 million to SR200 million, with employee numbers ranging from 50 to 249.
Saudi banks extended 94 percent of these credit facilities, with the remaining 6 percent granted by finance companies. Furthermore, the advances allocated to this sector represented 8.3 percent of the total credit from Saudi banks and 20.6 percent of credit facilities from finance companies.
According to the quarterly SME report released by Monsha’at for the third quarter of 2023, Saudi Arabia witnessed the growth of nearly 1.27 million SMEs, with Riyadh leading at 43.3 percent supported by public backing and robust investment. The country’s SMEs contributed to a 3.6 percent year-on-year growth in the non-oil economy, reflecting the success of diversification initiatives.
According to the SME bank chairman Yousef bin Abdullah Al-Benyan, the sector has experienced remarkable growth over the last period, attributed to the considerable attention and support provided by the government.
SMEs hold significant importance for diversifying income sources and fostering economic growth, serving as a crucial pillar for Saudi Arabia’s economic development and aligning with the goals of Saudi Vision 2030.
