The aims of the Financial Sector Development Program
The Financial Sector Development Program (FSDP) is one of 12 executive programs launched by the Council of Economic and Development Affairs to achieve the objectives of the Vision 2030 reform plan. The FSDP seeks to develop the financial sector to support the development of the national economy by stimulating savings, finance and investment.
The program is underpinned by three main pillars: Enabling financial institutions to support private sector growth, developing an advanced capital market, and promoting and enabling financial planning.
The FSDP was created initially to enhance the low level of coverage of financial services in the Kingdom, improve households’ low savings rates and weak financial planning culture, increase limited funding sources, and encourage the development of the digital transformation and automation infrastructure.
Enhancing the level of financial services coverage requires extensive efforts from various financial services providers, such as banks. The goal is to increase the number of adults who have bank accounts in the Kingdom to 80 percent by 2020, from 74 percent in 2016.
The FSDP also aims to raise household savings from total income to 10 percent by 2020, increase the size of financial assets as a percentage of the gross domestic product (GDP) by 201 percent from 192 percent in 2016, increase small and medium enterprises’ (SMEs) share of bank loans to 5 percent, and generate more high-paying jobs in the financial sector.
The FSDP aims to create a thriving financial sector that serves as a key enabler in achieving Vision 2030’s objectives. This requires the private sector to grow further in terms of assets relative to the Kingdom’s GDP.
It seems to me that the FSDP’s objectives and goals are on target, evidenced by the good results achieved to date, especially given the increase in financing provided to SMEs by financial institutions in the Kingdom, jumping from 2 percent in 2016 to almost 5 percent. Also, recent announcements of mergers in the Saudi banking and insurance sectors prove that the FSDP is working well regarding the increase in financial assets as a percentage of GDP.
Emerging players in financial technology, and the improvement noticed in the financial services sector (especially banking), are further signs that digitization and transformation to a cashless society are progressing well. This will hopefully allow the FSDP to achieve its target of increasing the share of non-cash transactions to 28 percent by 2020 from 18 percent in 2016.
The FSDP’s progress will benefit the national economy, the financial market and the private sector.
• Talat Zaki Hafiz is an economist and financial analyst.