Saudi Central Bank studies requests for consumer microfinance licenses

Saudi Central Bank studies requests for consumer microfinance licenses
Setting an amount of SR20 million as a minimum requirement for companies wishing to obtain a license is a result of internal studies conducted by SAMA. (Shutterstock)
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Updated 12 January 2021

Saudi Central Bank studies requests for consumer microfinance licenses

Saudi Central Bank studies requests for consumer microfinance licenses
  • SAMA aims to attract new type of investors to support growth

DUBAI: The central bank is studying three new requests for consumer microfinance licenses, said Bader Al-Otaibi, director-general of supervision of finance companies at the Saudi Central Bank (SAMA).

SAMA granted the first consumer microfinance license earlier this January to “Tamam” company, and is preparing to attract more actors in this sector after canceling the installments sale system.

During an interview with Asharq News, Al-Otaibi stressed that the bank aims, through consumer microfinance licenses, to attract a new segment of investors who are medium-capitals.

He added that the bank also aims to support economic growth opportunities and enhance financial inclusion by providing more financing products, in line with SAMA’s strategy to activate electronic channels in financing products, especially as most microfinance companies use financial technology.

“One of the reasons for licensing these type of companies with fewer requirements than the regular financing companies is to address the unfair practices that may occur after canceling the installment sale system,” he said.

HIGHLIGHTS

• SAMA granted the first consumer microfinance license earlier this January to ‘Tamam’ company, and is preparing to attract more actors in this sector after canceling the installments sale system.

• Applicants from the Kingdom urged to obtain small consumer funding from companies licensed by SAMA to protect themselves and preserve their rights.

Al-Otaibi called on applicants from the Kingdom to obtain small consumer funding from companies licensed by SAMA to protect themselves and preserve their rights. He said that setting an amount of SR20 million ($5 million) as a minimum capital requirement for companies wishing to obtain a license was a result of internal studies conducted by the bank. He added that this amount was appropriate for these types of financing companies because of their business model, target market and market share. “It also ensures that the company wishing to obtain a license is able to meet the licensing and supervisory requirements,” he said.

Al-Otaibi said that SAMA had published on its website draft rules for this type of company in order to obtain the opinions and perceptions of market customers, but it had not received many comments concerning the amount of capital.

An amount of SR50,000 ($13,000) was set as an upper limit for financing because 90 percent of loans granted from bodies other than banks were less than SR20,000 ($5,000), and these loans were for emergency purposes, he said. Al-Otaibi said that the rules did not require the financier to have specific guarantees, and that this was up to the financier, based on the degree of risk he was facing.

For beneficiaries, the regulations include a section detailing their rights, including nine rules, the most important of which is to give them fair and transparent treatment in financing and easy access to the service.


Drive helps SMEs enter Saudi market

Drive helps SMEs enter Saudi market
Updated 41 min 36 sec ago

Drive helps SMEs enter Saudi market

Drive helps SMEs enter Saudi market
  • They will be the main target of the export initiative, which is estimated by the Indonesian Ministry of Trade to be able to generate $60 million

JAKARTA: Indonesia has launched a campaign to help small firms in the country compete for millions of dollars-worth of food trade in Saudi Arabia.

The government aims to help small and medium-sized enterprises (SMEs) improve the quality and competitiveness of their products to meet the Kingdom’s required standards, Indonesian trade and commerce officials have said.

Under normal circumstances, before the coronavirus disease (COVID-19) pandemic, around 1.5 million Indonesians a year make the pilgrimage to Saudi Arabia to perform Hajj and Umrah and hundreds of thousands work in the Kingdom.

They will be the main target of the export initiative, which is estimated by the Indonesian Ministry of Trade to be able to generate $60 million.

To meet the Saudi food regulator’s standards, the Indonesian Chamber of Commerce (Kadin), the Ministry of Trade, and the Ministry of Cooperatives and Small-Medium Enterprises have teamed up to assist SMEs in improving products such as bottled chili sauce, soya sauce, coffee, tea, and sugar that are in highest demand among Indonesians in Saudi Arabia.

Kadin chairman, Rosan Roeslani, told Arab News: “We have facilitated five small-medium enterprises that produce soya sauce to obtain Saudi Food and Drug Authority approval for distribution, while nine tea and coffee producers are in the pipeline to also obtain a license. We have also submitted the application for four bottled chili sauce producers.”

While travel and pilgrimage restrictions remain in place due to the COVID-19 outbreak, he said that the time before things get back to normal will be used to prepare the SMEs — which contribute 60 percent to the country’s gross domestic product and employ up to 90 percent of its workforce — for expansion into the Saudi market as soon as the pilgrimage sector resumes.

“We still have time to groom them as there are many aspects such as hygiene, and consistency in their product quality and quantity that they need to improve,” Roeslani added.

In 2014, the Ministry of Religious Affairs issued a regulation obliging catering companies that provided food and drink to Indonesian pilgrims in Saudi Arabia to source their products from Indonesian producers whenever possible.

Indonesia’s vice religious affairs minister, Zainut Tauhid Sa’adi, said that as each Indonesian pilgrim received food from caterers an average 75 times during his or her pilgrimage, demand was high but supply in Saudi Arabia remained limited and similar products from India and Thailand had been used instead.

Kasan Muhri, director general for export development at the Ministry of Trade, told Arab News that the program to prepare the SMEs had been in the making since 2017 and officials eventually decided to launch it this year despite the COVID-19 restrictions.

“Just because there are few Umrah pilgrims now and this year’s Hajj remains uncertain, it does not mean that the market is gone.

“People from around the world would still go to Saudi Arabia to perform the pilgrimage, not just Indonesians, so we are doing this to anticipate the market when the economy revives, and things are recovered. We don’t want to be left behind,” Muhri said.

Besides food and beverage products, officials say they are also looking into the possibility of exporting items such as goodie bags, prayer beads, and other pilgrimage accessories made by Indonesian SMEs.