Awards for Excellence 2020
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A great deal of resources have been dedicated to small and medium enterprises in Saudi Arabia as the kingdom looks to increase SME’s contribution to GDP from 20% to 35% under its Vision 2030 programme.
In Saudi Arabia, 99% of private-sector companies are SMEs, although the sector lags behind regional and global peers in terms of size and value. Saudi SMEs contribute around 20% of GDP compared with 53% in the UAE and 45% on average among countries worldwide, according to research by Castlereagh Associates.
SMEs are expected to play a vital role in diversifying the economy away from oil and to provide employment for Saudi’s young population. In March 2020 the government announced SR50 billion ($13.3 billion) in financial aid for SMEs as the coronavirus downturn impacted economic activity.
With lack of financing the biggest challenge impacting SMEs in the kingdom, the Saudi Industrial Development Fund launched its Kafalah Program, which offers credit guarantees to banks to offer loans to SMEs.
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Tariq Al-Sadhan |
Working with the Kafalah Program, Riyad Bank has been able to increase financing to small and medium enterprises by 45% and 25% respectively in 2019. Of the total loans granted to SMEs through Kafalah, Riyad Bank has granted 26% of them and has been the most active bank under the scheme for the third year in a row.
Saudi Arabia’s fourth largest bank by assets, Riyad Bank has invested heavily in improving access to funding for the kingdom’s SMEs under the leadership of chief executive Tariq Al-Sadhan. The bank now offers 21 centres and offices providing dedicated SME services covering 15 cities around the country. It added services in three new cities in 2019, mainly in remote areas.
It has also streamlined its SME underwriting service and has reduced the average turnaround time to approve any new credit application of small borrowing clients to 14 days, compared with 42 days during 2016 and 32 days in 2017.
In 2019, Riyad Bank launched point-of-sale financing and debit cards for micro SMEs and in February this year launched a financing programme for SMEs to pay employees’ salaries on a fixed monthly date, which it says will enable businesses to attract and retain talent.
The bank outlines several success stories, including Signature Juice Factory, which had only 12 employees and three outlets when it began its relationship with Riyad Bank. Four years later it has 72 outlets and over 500 employees. Riyad Bank recently approved a new credit facility so that the company could take its brand to other GCC countries.
Riyad Bank has also supported RAZ Group from a 20-enterprise business, to 42 enterprises, 20 of which are receiving credit facilities of SR100 million in total.
Riyad Bank’s total income generated from the portfolio of small business grew by 42% after provisions and the medium segment grew 13%, while non-performing loans have remained low at 0.53%.
In the first quarter of this year, income from the SME business was up 16% year on year, while the number of SMEs with borrowing relationships had grown 20.4%.
