Saudis’ credit card debt rises to $4.46 billion

Banks hold a responsibility toward customers and must ensure that the customers are not overwhelmed with financial obligations that cannot be met in the future, the Saudi Arabian Monetary Agency says. (Shutterstock)
Updated 25 October 2019

Saudis’ credit card debt rises to $4.46 billion

  • Smartphone use and payment apps had also contributed to the rise in credit card use, says SAMA exec
  • SAMA has defined a limit for borrowers based on different income brackets

JEDDAH: Saudi Arabians owe SR16.72 billion ($4.46 billion) on their credit cards, a 6.96 percent increase from the first quarter of 2019 and a 19.25 percent increase compared to the second quarter of 2018, a banking official has revealed. 

The secretary-general of the media and banking awareness committee for Saudi Banks, Talat Hafez, also said around 3 million cards were issued and used in the second quarter of 2019, a slight increase from the previous quarter and a 4.3 percent increase compared to the same period last year.

He was unconcerned by the level of Saudi credit card debt, saying there were measures in place to ensure customers were not overwhelmed.

In 2018 the Saudi Arabian Monetary Agency (SAMA) introduced the principle of responsible lending, affecting consumers and lenders.

“The responsible lending principle takes a lot of the fear from the customer or that the lending institution could overload the customer with borrowing,” he told Arab News. “The banks hold a responsibility toward customers, to ensure that they aren’t overwhelmed with financial obligations that cannot be met in the future.” 

The rise in the number of credit cards being issued and used was gradual and there were several reasons for it, he explained, such as the increased use of credit cards to meet basic household consumption expenses, the ability to benefit from the credit limit, and convenience.

“There’s also the application of the principle of financial inclusion, which reduces cash circulation and spreads sale points for customers, stimulating them to pay by using their credit cards to earn bank reward points that can be used later.”

Smartphone use and payment apps had also contributed to the rise in credit card use, he added.

Companies and banks had to thoroughly study customers’ financial capacity, covering monthly basic expenses, even daily expenses, and ensuring the customers’ financial capacity was sound before offering them any kind of loan, said Hafez.

SAMA has defined a limit for borrowers based on different income brackets starting from below SR15,000 ($4,000), exactly SR15,000, below SR25,000 or exactly that, and above.

But the days of customers being scammed by banks or remaining ignorant were over and there was growing awareness among the public, he said. 

Customers were also responsible and must ensure that whatever they took was directed toward productive borrowing rather than consumption, and to know whether they had the capacity to meet the obligation and pay back the owed sum to avoid outstanding loans, said Hafez, which could only lead to more debt and a bad credit history.


Riyadh governor opens high-profile Saudi economic forum

Updated 40 min 44 sec ago

Riyadh governor opens high-profile Saudi economic forum

RIYADH: A high-profile conference to tackle some of the main challenges facing the Saudi economy was on Tuesday opened by Riyadh Gov. Prince Faisal bin Bandar.

Speaking at the opening session of the influential three-day Riyadh Economic Forum (REF), the prince praised the Saudi business community for its cooperation with the government in helping to strengthen the country’s economic fortunes.

The ninth edition of the forum, being held under the title “Human-Centered Economy,” will discuss some of the key future economic issues confronting the Kingdom.

Thanking King Salman for his patronage of the event, vice chairman of Riyadh Chamber and chairman of the forum’s board of trustees, Hamad Al-Shuwaier, said important recommendations linked to the Vision 2030 plan would be announced during the gathering.

These would be related to the areas of public finance reform, the nonprofit sector, future jobs, the environment, and reverse migration.

“What distinguishes the forum, which serves as a research center for national issues, is its focus on the principle of dialogue and participation between all concerned, specialized and responsible parties within the economic and social community, by intensifying meetings and promoting participation in all study discussions, with the aim of touching barriers in a close and intensive manner.

“Accurately diagnosing the facts gives accurate results when identifying solutions,” he added.

Special sessions of the forum will aim to generate practical suggestions and solutions to help with economic decision-making and to establish the principle of dialogue and participation among sectors of the business community.

In July 2019, the REF held a panel discussion at the chamber’s Riyadh headquarters on a study detailing the role of balanced economic development in reverse migration and sustainable and comprehensive development in the Kingdom.

Its focus was to identify the obstacles preventing the movement of young workers between towns and big cities, as well as highlighting ways to improve the quality of life in small urban centers through an analytical survey of industrial and service resources in different regions.

Al-Shuwaier noted that the forum was special in bringing together a broad range of intellectual and practical minds from government and private sector organizations covering many fields.

He added that the chamber was working on the final touches to transforming the forum into an independent economic think tank that served national economic issues.

Ajlan Al-Ajlan, chairman of the Riyadh Chamber of Commerce and Industry (RCCI), which organized the event, said the forum’s main objectives included using scientific studies and methodology to identify issues affecting the national economy, analyzing constraints on economic growth and working to combat them by learning from the experiences of other countries.

He pointed out that the forum coincided with the Kingdom’s presidency of the 2020 G20 summit of global leaders, being held in Riyadh in November, and that the eyes of the world would be on Saudi Arabia.

The forum is one of the participants in T20, an official G20 engagement group, with four topics related to important sectors discussed by the group.

The opening ceremony of the REF was followed by a session on future jobs, administered by Education Minister Hamad bin Mohammed Al-Asheikh. Delegates discussed employment requirements linked to the fourth industrial revolution and how to tackle the prospect of 40 percent of jobs becoming obsolete due to mechanization in the farming and industrial sectors.

The session highlighted that education should go hand in hand to prepare students for the jobs of the future.

Forum data showed its previous eight sessions attracted 33,938 attendees, an average of 4,243 participants per session.