FINANCIAL SECTOR

FINANCIAL SECTOR IS AT CENTRE STAGE OF SAUDI’S VISION 2030

The Financial Sector Development Program (FSDP) is a core focus of the wider Vision Realization Program, which is key to achieving goals set out in the Saudi Vision 2030.

Launched in 2017, the programme has achieved a number of notable successes, particularly the inclusion of Saudi Stock Exchange (Tadawul) in the global FTSE and MSCI indices, which raised the market’s international profile.

Another major success of the FSDP was the initial public offering of Saudi Aramco shares in 2019. Now one of the largest listed companies in the world. Aramco priced its IPO at SAR 32 (USD 8.53) per share, the top of its indicative range, raising USD 25.6 billion in the world's biggest IPO, beating Alibaba Group Holding Ltd's USD 25 billion listing in 2014.

“In the next stage, the Program will continue to strengthen financial institutions to support the private sector, through boosting the financial planning options and increasing the share of financing SMEs in banks,” Saudi Vision said. “The Program will also develop a sustainable and thriving insurance sector in the kingdom, increasing the share of non-cash transactions from 36% in 2019 to 70% in 2025.

Some of the other major goals are focused on raising the banking sector’s assets to SAR 4.553 billion in 2030 from SAR 2.631 billion in 2019.

                  

Second, the sector is expected to undergo a transformational change in terms of diversification. The market value of the stock market as a percentage of GDP will increase to 88% in 2030 from 66.5% in 2019 (excluding the Aramco IPO).

The FSDP aspires to be a leader in the fintech space, enhancing innovation in the financial services sector by raising the number of fintech companies in the kingdom to 525 by 2030. This will also create around 18,000 jobs in the fintech sector, increasing its GDP contribution to SAR 13 billion, and raising the volume of venture capital investments into the sector to SAR 12 billion.

“Third, the sector is expected to make progress to achieve an inclusive structure. The Program aims to increase the percentage of ownership of bank accounts among adults,” according to FSDP. “The Program also aims to create a shift towards financing productive financial assets, such as lending to small and medium enterprises. Thus, increasing the share of financing SME from banks to 20% in 2030 compared to 5.7% in 2019.

It also seeks to boost the insurance sector, one of the pillars of a country’s financial services sector. The contribution of the insurance sector to emerging economies has a direct impact on GDP growth. The Program aspires to increase gross written premiums as a percentage of non-oil sector GDP to 4.3% by 2030 from 1.9% in 2019.

Building up the country’s digital infrastructure is also critical in creating a modern, cashless society. The government hopes to increase the share of non-cash transactions to 80% in 2030 from 36% in 2019. As a result, the sector will provide a superior customer experience and achieve higher operational efficiency.

“Finally, the Program aims to maintain financial stability. This will ensure the sustainability of the sector in general in the long term and its continued empowerment of the financial sector. To achieve this goal, the Program is designed to comply with international standards of financial stability, including the requirements of the Bank for International Settlements and the International Organization of Securities Commissions,” FSDP noted.

 

SAVINGS CULTURE

Another key objective of the FSDP is to develop the National Saving Strategy to encourage a savings culture in the kingdom.

In 2020, the National Savings Strategy was updated to address the causes of low levels of savings in Saudi Arabia through raising and improving financial levels and financial behaviours. To achieve this, the National Saving Strategy and the Financial Literacy Strategy were merged under the National Savings and Financial Literacy Strategy.

“The objectives of the strategy are to help individuals make sound financial decisions, achieve financial well-being, and access to personal financial tools. The strategy will also develop supportive regulatory and legislative frameworks that will support the promotion of a savings culture,” according to FSDP. “It will also provide easy access to various financial products and services.”