RIYADH, 19 August — In a move to reduce lending risk, commercial banks have placed a large number of individual loan defaulters on a common negative list.
The banks, which have refused to entertain loan requests from defaulters, are also working to set up a long-awaited credit bureau which will start functioning by this year-end. "A number of notorious individual defaulters have been placed on a negative list circulated within the banks", said a quarterly report entitled "Perspectives" released by the local AlBank AlSaudi AlFransi(BSF) here. The banking mechanism and the negative list will help the banks identify a defaulter, who might contact a different commercial bank for loan facilities. The exact number of defaulters blacklisted by the banks in Saudi Arabia was not immediately available. The local bank officials also could not provide details about the proposed formation of the credit bureau.
The report, however, said that the insatiable appetitle for durable goods, equipment and housing units are translating into huge opportunities for Saudi banks, which are realigning their offerings to cater for the growing needs of families.
A baby boomer society is under way in the Kingdom with the tendency toward marrying early and establishing large families. The local population, which is growing at a rate of 3.1 percent annually, will exceed 30 million by 2020 prompting the banks to introduce lending products tailor-made for individuals and small family-owned businesses. Hence, the banks are also reviewing mechanisms to minimize default risks attached to individual lending. Referring to the growth in consumer loans, the BSF report said that "the total consumer loan and credit facilities have witnessed a major 263 percent jump beween 1998 and 2001, reaching SR40.6 billion thanks to growing demand mainly for cars, equipment and other items".
The cars and equipment loan figures alone show an increase of 600 percent reaching13.9 billion by 2001 end.
A trend toward long-term consumer financing has also been witnessed, according to Saudi Arabian Monetary Agency statistics which indicate that personal credit extended for periods of three years and above amounted to 52 percent of the total this year compared to 29 percent in 1998. This suggests more demand for long-term financing in the fields of real estate, house repairing and investment in equity markets.
