RIYADH: Credit facilities extended to micro, small, and medium enterprises in Saudi Arabia grew by 17.04 percent year on year in the second quarter of 2024, totaling SR307.4 billion ($82 billion), according to recent data. 

The Saudi Central Bank, known as SAMA, reported that 94 percent of these were provided by Saudi banks, while finance companies accounted for the remaining 6 percent. 

The facilities accounted for 8.8 percent of banks’ total lending portfolio and 19.5 percent of finance companies’ credit portfolios. The government is urging financial institutions to allocate 20 percent of their loan portfolios to this sector, demonstrating strong and ongoing support for these enterprises. 

Recent reforms in Saudi Arabia have simplified investment and startup processes, increasing this sector’s share of gross domestic product from 21 percent in 2013, with a Vision 2030 goal of reaching 35 percent.

In the second quarter, medium-sized enterprises received the largest share of credit facilities, totaling 54 percent or SR167.31 billion.

Micro enterprises experienced substantial growth, achieving a 45.53 percent increase in credit to SR33.7 billion, despite holding a smaller overall share.  

Credit to small enterprises, making up 35 percent of MSME financing, rose by 26.84 percent to SR106.39 billion during the same period. 

Micro enterprises are defined as those generating revenues up to SR3 million with a workforce of no more than five employees. 

Small enterprises have earnings ranging from SR3 million to SR40 million and can employ up to 49 workers, while medium enterprises generate between SR40 million and SR200 million in revenue and employ 50 to 249 individuals. 

Lending to the MSME sector in Saudi Arabia is experiencing strong growth, driven by the Kingdom’s economic diversification efforts under Vision 2030. 

As the country shifts away from oil dependency, demand is rising for private businesses to expand in key sectors such as entertainment, hospitality, sports, and retail — industries supported by a young, aspirational consumer base. 

Government initiatives like the Kafalah program play a crucial role in empowering MSMEs, particularly in the non-oil sector, by providing financial support and fostering sustainable economic development. 

Monsha’at key figures 

Monsha’at, a key enabler of Saudi Arabia’s Vision 2030, plays a vital role in the SME ecosystem by enhancing access to finance, promoting entrepreneurship, and providing critical support for business development. 

The authority facilitates funding for this sector through partnerships with financial institutions and initiatives like the Kafalah Program, which increases lending. It prioritizes upskilling SMEs through training programs and advocates for regulatory reforms to improve the business environment. 

According to its second-quarter report, Saudi Arabia saw a significant surge in commercial registrations, which grew by 78 percent year on year to 121,521, with 45 percent attributed to female-owned businesses. 

This rise underscores the private sector’s crucial role in driving the Kingdom’s economy and signals a boost in entrepreneurial activity and the creation of new businesses, many of which fall under the MSME category. 

The report also indicated a 4.3 percent increase in new registrations compared to the first quarter of 2024, demonstrating sustained growth across various sectors of the economy. 

In terms of regional distribution, Riyadh accounted for 32 percent or 482,690 active registrations, followed by Makkah with 23 percent or 342,840, the Eastern Province with 235,606, and other regions totaling 457,520. 

The report emphasized the vital role of financial technology in enhancing the growth and sustainability of MSMEs in Saudi Arabia. 

Established by SAMA and the Capital Market Authority, initiatives to foster a dynamic fintech ecosystem have led to significant advancements in the sector, exemplified by the Kingdom’s first fintech initial public offering for Rasan in May, which attracted considerable investor interest. 

By the end of 2023, the Kingdom was home to 216 active fintech companies employing over 6,500 skilled professionals. This growth reflects a robust investment landscape, with more than $1.84 billion in venture capital flowing into the sector. 

According to the report, the Fintech Lab has emerged as a key driver in this space, promoting growth and innovation by offering a supportive regulatory framework for entrepreneurs and startups to develop and test new products and services. 

This initiative has led to the emergence of innovative business models and the expansion of fintech startups. Furthermore, the Lab provides investment solutions for various investors and financing options for SMEs.

Authorized fintech companies have made significant contributions to job creation across multiple sectors. 

Looking ahead to 2024, initiatives such as the Open Banking Lab will create a collaborative environment for banks and startups to innovate, while the Financial Academy aims to enhance training for entrepreneurs and SMEs. 

The Makken Program will continue to support startups by easing regulatory and technological compliance costs, ensuring that this sector remains a driving force in expanding Saudi Arabia’s MSME landscape.