At the beginning of the current fiscal year, one local bank reported an increase of 50 percent in its net profits during the first quarter compared to the same period last year.

With such huge profits made in times of abnormal economic and political conditions, the local stock market reacted with enthusiasm. The financial results came as a surprise even to many observers.

Going through financial statements issued by banks for the first quarter, it is easy to see that only one source of money-making is behind all this rosy performance — installment and credit sales. Over a period of just one year, these sales jumped from SR227 million to SR419 million, an increase of 85 percent. The increase was the direct result of the hike in car sales by installment with the amount of money involved here put at SR11.5 billion compared to SR7 billion during the same period last year. This is a staggering increase of 64 percent.

Such alarming figures call for an immediate comprehensive study on the possible socioeconomic effects of such phenomena on people’s lives. This is especially true if we know that the amount of installment sales in one bank is expected to reach SR900 million at the end of the second quarter. If this is the figure for only one bank over a six-month period, what will be the volume of installment sales when all other banks and other financial organizations announce their results? What kind of economic future do we expect for coming generations of Saudis if this trend continues? What will become of people if these trends continue for long periods?

It is virtually certain we will have to deal with a population saddled with debt for the rest of their lives. They may even pass on a legacy of debt to their children. The problem is so urgent that it requires the immediate intervention of the authorities.

People buying on credit through bank guarantees are spending 15 percent of their income on debt servicing. This means more changes can be expected in the income-distribution structure with the economic gap widening further between different sectors of the population.

Arab News From the Local Press 1 July 2003