SME

NEW BANK TO BREAK FINANCIAL BARRIER FOR SAUDI SMES

The creation of a bank for small and medium enterprises (SMEs) is a transformational step for Saudi Arabia.

Financing is often considered one of the key challenges facing SMEs across the world, and a dedicated financial institution for small businesses is a breakthrough for the country’s economic diversification plans.

"The SMEs Bank brings together all financing solutions under one umbrella to enable the small and medium enterprises sector to access appropriate financing and achieve stability and growth," the Ministry of Commerce wrote on Twitter.

"The SMEs Bank will provide all its products and services in digital form without the need to establish branches," Saudi Press Agency (SPA), the kingdom’s state news agency added on Twitter.

The government aims to increase SMEs’ contribution to GDP to 35% by 2030 and views the sector as a vital plank of its diversification ambitions.

LENDING A HELPING HAND

The banking sector, led by the Saudi Central Bank (SAMA) was very supportive of SMEs last year to ensure they can emerge from the global health and financial crisis relatively unscathed and ready to grow again.

Around 33 financial institutions participated in Kafala, the SME loan guarantee programme in 2020 compared to 18 in 2019, highlighting the banking sector’s crucial role in supporting small businesses.

As many as 4,945 SMEs secured guarantees of SAR 12.3 million through the programme.

In a bid to ease funding in the kingdom, the government also established Funding Gate, a new platform connecting government and private sector loan providers. In 2020, Funding Gate supported 799 SMEs to finance as much as SAR 1.2 billion, according to SAMA.

Jada, a USD 4 billion fund of funds company created by the Public Investment Fund, also signed a deal with the Venture Capital and Private Equity Association to support the kingdom’s venture capital and private equity industry.

“In accordance with the co-operation agreement, the two parties will ex-change experiences to contribute to the support and development of the venture capital sector and private equity and participate in the development of training programmes to raise the level of professionalism in the sector, as well as to co-operate in research and studies fields,” according to SAMA.

Meanwhile, the General Authority for Small and Medium Enterprises (Monshaat) held several virtual sessions last year focused on government financing initiatives to support SMEs, which generated 900,000 views.

Major entities are also boosting the entrepreneurship culture in the kingdom.

Late last year, Saudi Arabian Basic Industries Corp. said 43 entrepreneurs graduated from its SABIC Plastic Applications Development Center (SPADC) and are now qualified to invest in the market. Their projects will create 6,610 jobs and contribute SAR 8.8 billion to the GDP.

Saudi Tourism Authority (STA) also launched a new programme in March to nurture the development of domestic travel and trade businesses.

“Across the kingdom, we are seeing different types of small-to-medium sized businesses transform their working models and offering so that tourism is at the heart of their core product,” said Fahd Hamidaddin, CEO of STA.

The Tourism Shapers programme hopes to inspire the country’s SMEs to identify new opportunities and grow their business.

Some SMEs have already pounced on new opportunities. A new report by the Global Entrepreneurship Monitor (GEM) noted that Saudi entrepreneurs with an online presence were able to pivot promptly to ecommerce have increased their market share during the COVID-19 crisis.

“For example, Saudi e-commerce solution platforms such as Salla and Zed have adapted to the situation and reported a huge jump in revenues,” according to GEM. “Saudi edtech platforms such as Classera have collaborated with the Ministry of Education to find solutions for teaching students online during the curfew. In logistics, the Saudi company CITC reported the delivery of 12 million orders during the lockdown, representing a 200% increase compared to 2019.”

FERTILE GROUND FOR ENTREPRENEURS

GEM’s latest report shows Saudi Arabia was ranked 7th in its list of countries that have created optimal settings for individuals to start and grow a business.

The GEM’s National Entrepreneurship Context Index measures 12 environment conditions that can help assess entrepreneurial activity taking place in a country.

According to the report, Saudi Arabia made impressive stride last year in improving market dynamics, regulations, and domestic policies to nurture entrepreneurs. The kingdom’s small businesses also reacted proactively to lockdowns during the pandemic, with a score of 7.7 in that particular segment of the ranking – the highest among all the 44 countries reviewed.

“The most prominent positive evaluations are given in Saudi Arabia, Panama, Guatemala, United Arab Emirates, United Kingdom, Brazil, Taiwan, Puerto Rico, and Chile,” GEM noted.