SME

THRIVING START-UP SCENE ALLOWS SAUDI TO SHINE AMID THE PANDEMIC

Saudi Arabia was home to more than 750,000 small and medium enterprises (SMEs) at the end of the first quarter of 2021.

The first quarter report of the kingdom’s General Authority for Small and Medium Enterprises (Monsha’at) shows a 15% year-on-year increase in the authority’s funding to Saudi SMEs during the period

The number of SMEs operating in the kingdom surged 14.6% to 752,560 in the quarter, compared to 650,550 in the same quarter last year.

Funding for Saudi SMEs via Monsha’at-facilitated services saw the Kafalah programme guarantee SAR 64.6 billion in secured loans to entrepreneurs, while the Tamweel platform enabled SAR 12.3 billion in loans; the Saudi Venture Capital Company invested SAR 1.4 billion; and the Indirect Lending Initiative provided low-cost loans of SAR 2.5 billion to companies, according to the authority’s SME Monitor quarterly report, which aims to track the sector’s growth.

“SMEs need streamlined bureaucracy, lower fees, and the ability to compete in the market,” said Eng. Saleh Ibrahim Alrasheed, governor of Monsha’at. “We are ensuring that SMEs get the support they need, and that growth is transformed into sustainable business models.

A HAVEN FOR ENTREPRENEURS

The SME ecosystem is said to be benefitting from the Saudi capital’s rising global status. “Riyadh is fast becoming an entrepreneurial hub with a global reach,” said Lateefa Alwaalan, managing director of Endeavor Saudi, in the report. “Entrepreneurs see Riyadh as the gateway to the largest consumer market in the GCC.”

More than 239,000 small businesses, or 31.8% of the total, are located in the Riyadh, employing over 1.8 million people. The capital is already emerging as a major regional business hub with a number of international companies looking to set up their office in the city, attracted by the spate of opportunities under way through the Saudi Vision 2030 initiative and the various programmes under its umbrella.

During the first quarter, Riyadh also hosted the Global Entrepreneurship Congress (GEC), a global event that brings together leading voices in entrepreneurship, including innovators, regulators and financers. GEC saw SAR 51.8 billion worth of deals and more than 10 rounds of financing for Saudi start-ups.

“Monsha’at’s latest quarterly report reveals a robust and expanding SME ecosystem where new ideas are matched with increasing sources of funding and institutional support. While traditional sectors such as retail and construction have greatly benefitted from this systemic expansion, newer markets such as fintech, entertainment, tourism, sport, and VC have also surged,” the authority wrote in its quarterly report.

The kingdom’s SMEs employed an impressive 4,924,239 people across the country. In terms of sector distribution, retail accounted for the single biggest share (14% of the total), closely followed by construction (13%), and food and beverages (10.2%).

 

INSIGHT INTO ENTREPRENEURIAL MINDSET

The Monsha’at report also offers some insights into the mindset of Saudi entrepreneurs. Around 33% of Saudi adults plan to open a business in three years, while 90% see entrepreneurship as a good career choice.

Saudi entrepreneurs are also eyeing franchises. As many as 30 franchise brokers enrolled in the qualifying programme, while 20 licences were issued to franchise brokers during the first quarter of 2022. The authority evaluated 120 brands during the first quarter to ensure they are eligible for franchising.

CULTURE AND ENTERTAINMENT

Saudi Arabia’s culture, entertainment, and sports (CES) sector is among the best performing, and most promising sectors in the SME space. Opportunities in the sector are supported by a proactive government policy that has established 11 commissions to focus on promising sectors. 

“CES SMEs generate an average revenue of SAR 2.4 million per year, compared to an emerging sector average of SAR 3 million, Monsha’at said.

The authority is supporting the entry of SMEs to the CES sector by providing financial support and other facilities such as electronic trade, sales and marketing, planning and strategy, accounting and human resources, wholesale and retail trade, and technology and innovation.

Monsha’at is also focused on raising the performance of CES SMEs in relation to those operating in other sectors and has identified seven pain points for SMEs, such as their inability to secure business due to low trust and lack of scale, low community connectivity due to scattered services and platforms, lack of support to commercialise intellectual property, and low access to finance.