Personal loans: Banks push for more clients

Local banks are vying to expand their loans to a greater number of customers, particularly employees in both the public and private sectors.
The new steps include reducing payment of the first installment to 5 percent of the total loan while some banks have increased their ceiling on a housing loan to SR 7 million.
Local banks are striving to guarantee direct financing to clients before the announcement by the Saudi Real Estate Development Bank of its decision on short-term loans.
The banks are also racing against time to attract as much customers as possible before the Ministry of Housing starts distributing thousands of housing units that are currently under construction.
Banking officials hope to attract a significant number of clients because of the track record of good relations they mutually have.
“Some banks are taking hurried steps such as extending their loans to more sections of people because of their fear that demand for housing loans will fall thanks to government’s new housing schemes and real estate financing,” Fadl Al-Buaynayn, a Saudi economist, said.
Abdullah Al-Olayani, branch manager of a bank in the Eastern Province, said: “My bank decided to bring down the percentage of the first installment because a higher installment was a major obstacles for real estate loans.”
The interest rate basically depended on the exchange rate and in agreement to the rate of the Saudi Arabian Monetary Agency (SAMA), which encourages disbursement of private loans.
He said the present competition of local banks with the Real Estate Development Fund and the Ministry of Housing’s projects demands that the banks should lower the interest rates and come up with other facilities such as giving quick loans. Besides financing for housing, the banks are also competing in the area of personal loans.
Abdul Aziz Al-Otaibi, a banker, said: “Hurried governmental efforts to end the housing problem have prompted local banks to introduce new financing programs that please those who are looking for housing loans. While some banks lowered the percentage of the first installment required of the real estate financing or raised the ceiling for the housing loan to SR 7 million, some other banks minimized administrative fees to a token level,” Al-Otaibi said.
The competition is also between 11 local banks in the real estate financing and personal loans. One of the banks even resorted to slashing its interest rate to 1.99 percent in the first year apart from promising a very low interest rate if the debtor is ready to make early repayment, Al-Watan daily reported yesterday.
However, competition among the banks also serves as a support to the government plans to stamp out the housing problem in the country.