Saudi Arabia’s SME Financing Guarantee Program (Kafalah) has injected $23.8 billion to support small and medium-sized enterprises (SMEs), a sector considered the backbone of the national economy and a key driver of the kingdom’s Vision 2030.
Established in 2006 as a non-profit government initiative, Kafalah provides financial guarantees to banks and other lenders, enabling SMEs that lack traditional collateral to access credit. By reducing lending risks, the program not only facilitates business growth but also strengthens financial stability and inclusion.
Since its inception, Kafalah’s portfolio has reached SAR 123 billion ($23.8 billion), with guarantees totaling over SAR 80 billion ($21.3 billion). CEO Homam Hashem told Asharq Al-Awsat that the program has helped finance more than 6,000 SMEs and processed around 7,000 loan applications.
Hashem highlighted the program’s impact on employment. Microenterprises supported by Kafalah see job growth of 27 percent within two years, small enterprises around 15 percent, and medium-sized firms 8–10 percent. He said that guarantees are highest in strategic sectors like tourism and entertainment, covering up to 90 percent of financing, compared with 80 percent or less in traditional commercial sectors.
According to Hashem, digitalization has also sped up processes dramatically. The average guarantee approval time has dropped from 49 working days to just 2.5 days, and sometimes as fast as a single day, boosting lender confidence and enhancing the program’s effectiveness during crises such as the COVID-19 pandemic.
Kafalah has expanded into emerging industries including fintech, technology, financial consulting, dentistry, and tourism, working with relevant ministries and authorities to ensure targeted, efficient financing. Women-led enterprises have seen notable increases in dedicated funding and employment opportunities.
Strategic Support and Expansion
The program works through lenders licensed by the Saudi Central Bank, reducing collateral burdens on SMEs and enhancing their contribution to GDP. Support from the SME Bank provides both financial and logistical backing, allowing the program to grow steadily. Hashem said Kafalah’s portfolio expands 20-25 percent annually and will continue to broaden its guarantees to cover new sectors.
“We encourage financial institutions to increase SME lending in partnership with Kafalah and to focus on new sectors such as fintech, where broad opportunities and diverse financing options exist,” he added in a call to lenders.
