Saudi banks pull welcome mat for SMEs

Lending under the nation’s SME Loan Guarantee Programme, plunges 76%

Hasan Al Hazmi knew he couldn’t depend on Saudi Arabian lenders when opening his business last year even with the kingdom’s drive to boost credit to small- and medium- sized companies.

“Banks are not lending to any start-ups without providing annual financial statements audited by licensed entities in Saudi Arabia,” said Al Hazmi, co-founder of Riyadh-based Supply and Logistics Solutions that started operations last year providing storage and cargo services. “How would I be able to provide a bank with statements if I just started?”

Lending under the nation’s SME Loan Guarantee Programme, also known as Kafalah, plunged 76 per cent to 572 million riyals (Dh560 million, $153 million) last year as banks tightened rules, according to data from the Saudi Industrial Development Fund.

That compares with a 12 per cent increase for total bank credit last year to 1.25 trillion riyals, according to Saudi central bank data.

“Banks in Saudi Arabia find it challenging servicing the SME market,” Yahya Al Yahya, chief executive officer of Bahrain-based Gulf International Bank, which is majority owned by Public Investment Fund of Saudi Arabia, said in an email on Tuesday.

“SMEs tend not to have reliable financial information, specifically audited financial accounts.”

The difficulties in obtaining credit may be an obstacle in the country’s efforts to create jobs and diversify the economy away from oil, which brings about 90 per cent of government revenue.

The kingdom, the world’s biggest crude exporter, is investing $500 billion on industry, transportation and housing, a programme the government expanded after watching revolts sweep across other highunemployment Arab countries three years ago.

Saudi Arabia’s unemployment rate was 11.7 per cent last year, according to the Central Department of Statistics and Information.