This is an unbelievable increase of 470 percent over the last 10 years, which is extremely worrying because of the potentially catastrophic implication for social cohesion brought about by debt-ridden individuals unable to cope, an increase in fraud cases, people caught up in court and legal proceedings, and widening variations in social class.

These issues go against the stated government intention to achieve the welfare of citizens and minimize debt due to the fact that the Kingdom has one of the highest financial reserves per capita in the world.

We should also take into account the religious warnings against lavish spending, bingeing and ostentatious extravagance on which the banks base their strategic financial plans, including the increase in the size of loans to individuals.

All such things are sparked off by the financial sector’s push selling approach of credit and personal debt, influenced by the media, echoed by some writers in the newspapers, and aided by the regulatory information reflecting the credit situation.

All these factors favor the banks and their regulations, the unfair contracts by banks designed for their benefit alone, which victimize and suppress the individual through the systematic brutality of the “one-sided agreement.”

Some people, such as bank employees and beneficiaries and those working in the wider banking sector, may argue that the Consumer Debt Rate doesn’t exceed 11 percent of GDP, which is considered a very low rate in their view compared with other countries.

They also argue that the bad debt (doubtful debt) rate is 1.3 percent, which is very low compared with other countries.

Others say that Saudi Arabia is not like the US because we did not expand the process of selling debt and its products, that we have a special situation (unique one) and that the Saudi Monetary Agency has established strict regulations since 2006 regarding the expansion of personal debts to individuals.

In order to put these claims and arguments into perspective, I would like to point out the following:

Debt has a special importance in our society and religion, which differs totally from all other contemporary and financial regulations.

We realize that the strong and deep religious guidance on such subjects is at odds with the opinions, trends and rates that some of the banks try to tell us about.

Banks employ the religious teachings in their favor by incorporating them into their regulations and those of the affiliated information centers, such as the credit information companies, by holding the debt and the collection for as long as they wish, until the person either dies or pay off his or her debt.

So it is logical to have bad debts at a very low interest rate of 1.3 percent with excessive amounts of profits because our banks benefit from the Western system, its motivation and methods based on debts and usury.

It is worth mentioning that bad debts are forfeited in the Western system after diligences of 7 or 10 years, during which periods the individual is prohibited from taking out credit, whereas in Saudi Arabia the debt remains in the banks’ credit information centers as long as the individual is alive, irrespective of the passage of time. So under the Saudi banking style it is normal to have a low rate of bad debts, in addition to the fact that debts are collected in a very aggressive manner, the “Cowboy Trip Method,” whenever the banks request it. And all this is happening while the bank receives unreasonably high guarantees through a process that is similar to monopoly. No wonder the Saudi banks make huge profits: Almost no other country’s banks double their capital through net profit every two years or less.

The low rates of personal loans (consumer loans), which reached SR219 billion representing 11 percent of the GDP, is a confused argument due to the fact that the Kingdom has been experiencing an economic spurt since 2005 and government debts have been continuously decreasing until they recently reached around SR136 billion, which represents approximately 6 percent of the GDP.

On the other hand, individual consumer debts are increasing in an unbelievable rate and as mentioned it does represent 11 percent of the GDP, and in a way confusing both the society and the national economy.

As we said earlier, the rate reached 470 percent over the last ten years, which I can almost say is the highest growth rate in the world. I can also almost guarantee that more than 86 percent of nationals are on the late payment lists B & C of the credit bureau, and that more than 60,000 people are on the total bad debt list and may be sent to jail! All of this concerns us deeply and raises the alarming question of the exact role of the banks, particularly as they seem to be playing against government policy and the society welfare.

They want to stifle people with debt and accordingly increase the gap between the rich government and the poor debt-riddled citizens.

Those who claim that the Saudi Arabian Monetary Agency (SAMA) has been very strict in protecting individuals from consumer debt are seeing only part of the picture.

A few years ago stock prices surged but the market dropped sharply on Feb. 25, 2006. When the index reached 20,635 points, the banks encouraged individuals through direct sales of it staff and media advertisements to take on expanded loans exceeding the 40 percent of their income to be invested in the stock market.

Such practices made the SAMA to intervene at the beginning of January 2006 and decide that loans should not exceed 33 percent of total salary in the case of employees and 25 percent in the case of retired people and for a short period.

Even this restriction, which did not provide full protection to individuals through rules and regulations, was evaded by some banks through the use of a new technique, a very dangerous and vicious cycle, whereby the loan was repaid by a new loan — the grace period for repayment extended to two years in order to gain more banking profits, “Paying Debt by Debt.”

We want to tell our esteemed banks and the financial monitoring system of SAMA that you are part of society and that integrity forces us not to fill our society with debts which go against our religion, social values and the plans of the government.

Also, we should not create social or capital variations.

We should stop promoting consumer loans, encourage individuals to get loans, reformulate all financial and control systems, especially those which are based on religion. We should encourage the culture of savings and investments and make sure that debts, where absolutely necessary, are for productive purposes.

We need a productive society, not a consumptive one suffocated by bank debt. Banks should be good citizens, too, and should change their ways and reorganize priorities.

Social responsibility is not a slogan to be chanted in order to gain compliments, new clients, government approval and double benefits in a semi-monopoly environment. You “banks” should fix your internal institutions, because the entire world has agreed that the current financial problem is debt, its expansion and the building of financial services around it.

It is true, as many signboards say, “the problem is not capitalism but the capitalism,” which our banking system follows.

— Sami Al-Nwaisir is a financial expert and chairman of board of Al-Sami Holding Group. [email protected]