Now is the time to start and grow an SME in Saudi Arabia

As the world marks the UN Small and Medium Enterprises Day, Saudi Arabia’s SME sector is steadily emerging as among the globe’s most resilient and domestically supported entrepreneurial markets.

Saudis no longer feel compelled to move abroad to achieve their entrepreneurial ambitions. Our SME business ecosystem has reached a tipping point: Local business owners are now receiving more support to launch, build and grow their entities.

The Kingdom’s interventions to boost entrepreneurship and diversify the economy as part of its Vision 2030 strategy have yielded significant, and objectively measured success across entrepreneurial governance, growth and financial support.

The Global Entrepreneurship Monitor 2021/2022 report places Saudi Arabia among the top five territories in the world to start a new business, driven by key MSME policy changes that strengthened the sector, provided prolific finance pipelines, and offered critical advisory support.

SME-friendly legislation, regulations, and initiatives are making it easier to start and grow SMEs in the Kingdom, from lowering market entry cost to reducing fees, narrowing the volume of required paperwork, and introducing small business-friendly policy.

These reforms have reduced the processing time for business permits from 53 days to under four, and triggered a 65 percent growth in business owners between 2017 to 2020.

This is leading to the evolution of the economy into an innovative, agile one, capable of adjusting to new market trends and technologies. 

In particular, the new Government Tenders and Procurement Law, which exempts new companies from providing a bank guarantee for the project they are bidding, has significantly increased SMEs’ ability to bid for public procurement.

 The Kingdom has increased its number of registered SMEs by almost 15 percent year-on-year to over 750,000 in 2022. Perhaps the most significant factor maintaining this sustained growth was Saudi Arabia’s rapid response to the threat posed to small businesses by the COVID-19 pandemic. 

Key policy changes and cash injections buffered small businesses from the pandemic-led downturn, enabling the Kingdom to successfully emerge as a natural home for entrepreneurs.

Unlike most GEM economies, Saudi Arabia experienced increases in both entrepreneurial activity rates and attitudes through both 2020 and 2021. Impressively, Saudi business leaders rated their government’s response to the pandemic at 8.4 — rendering it the leading GEM economy in terms of support provided to emerging business owners during this international crisis period.

The introduction of financial support interventions and partnerships has further buoyed the Kingdom’s entrepreneurial success, with the lending system for SMEs swiftly formalizing.

We have moved from informal lending networks to an ecosystem wherein banks are competing to lend to firms. SMEs now have a variety of financing options and product types from which they can choose. 

For instance, equity investment and venture capital are increasing their footprint, with the Saudi Venture Capital Company committing SR1.2 billion ($320million) to SMEs and venture capital funding reaching over SR2 billion in 2021, representing a capital annual growth rate of 106 percent.

The recent Global Entrepreneurship Congress 2022, held in Riyadh, has produced investment agreements in the SME sector worth SR51 billion. During the congress, the launch of the new SME Bank was also announced, to be capitalized with SR12 billion to finance new businesses.

It is becoming clear that roadblocks to loans are being dismantled. SMEs are now able to access low-cost loans ranging from SR50,000 to SR7.5 million from several licensed financing companies.

SMEs have also access to a wide array of free advisory services provided by leading government agencies, investors, and financial institutions, including the SME Support Center, Innovation Centers, and the Nawafth app, which offer on-site and online consulting services. 

In addition, from business accelerators that upskill entrepreneurs and connect them to investors, to Mazaya, a digital portal that helps small businesses optimize costs, SMEs can now access a broad range of support services. 

In short, there has never been a better time to start or grow an SME in Saudi Arabia.

As one of the youngest, most curious, and best-connected populations on earth, Saudis are adopting new technologies, ideas, and innovations faster than ever before in our history.

With enduring enabling legislation, financial support, and access to advisory resources, the Kingdom’s SME sector will continue to affirm its role as a critical lifeblood of the Saudi economy.

• Saud Alsabhan is vice governor, entrepreneurship at Monsha’at.