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3,000 Saudi SMEs Benefit from Loans Exceeding $2.1 billion

Cafes are among the small establishments witnessing growth in the Saudi market (SPA)
Cafes are among the small establishments witnessing growth in the Saudi market (SPA)
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3,000 Saudi SMEs Benefit from Loans Exceeding $2.1 billion

Cafes are among the small establishments witnessing growth in the Saudi market (SPA)
Cafes are among the small establishments witnessing growth in the Saudi market (SPA)

Around 3,000 Saudi SMEs benefited from The Small and Medium Enterprises Loan Guarantee Program (Kafalah) during the first half of 2024.

The program reported issuing 3,543 financing guarantees worth over SAR 8 billion, compared to SAR 7.2 billion last year, marking an 11.66% increase. The value of the guarantees provided exceeded SAR 6 billion, compared to SAR 5.7 billion in 2023, reflecting a 4.63% increase, according to a statement by Kafalah.

CEO and Board Member Homam Hashem stated that SMEs are the main economic driver and crucial for achieving economic development and income diversification, as emphasized by Vision 2030.

He highlighted the importance of government and private sector efforts to support SMEs and address their challenges, pointing to the program’s success as a public-private partnership model.

Kafalah program, in coordination with the SME Bank, aims to achieve Vision 2030 goals in all initiatives and products, helping SMEs obtain financing to grow and expand across the Kingdom, and encouraging financial institutions to engage with the SME sector.

Since its launch in fiscal year 2006, and until the end of the second quarter of 2024, the program has approved more than 63,000 guarantees benefitting 22,000 SMEs, with a total value of financing exceeding SAR 99 billion ($26.4 billion). The total value of issued guarantees amounted to SAR 70.5 billion.

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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
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Saudi Arabia Sees Highest Level of Non-oil Private Sector Activity in 4 Months

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)
The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders. (Asharq Al-Awsat)

Business activity in Saudi Arabia's non-oil sector accelerated to a four-month high in September, driven by strong demand, which led to faster growth in new orders. The Riyad Bank Saudi Arabia Purchasing Managers' Index (PMI), adjusted for seasonal factors, rose to 56.3 points from 54.8 in August, marking the highest reading since May and further distancing itself from the 50.0 level that indicates growth.

The 1.5-point increase in the PMI reflects a larger expansion in both output and new orders, alongside challenges in supply. The improvement in business conditions contributed to a significant rise in employment opportunities, although difficulties in finding skilled workers led to a shortage in production capacity.

At the same time, concerns over increasing competition caused a decline in future output expectations. According to the PMI statement, inventories of production inputs remained in good condition, which encouraged some companies to reduce their purchasing efforts.

Growth was strong overall and widespread across all non-oil sectors under study. Dr. Naif Al-Ghaith, Senior Economist at Riyad Bank, said that the rise in Saudi Arabia's PMI points to a notable acceleration in the growth of the non-oil private sector, primarily driven by increased production and new orders, reflecting the sector’s expansionary activity.

Al-Ghaith added that companies responded to the rise in domestic demand, which plays a crucial role in reducing the Kingdom's reliance on oil revenues. The upward trend also indicates improved business confidence, pointing to a healthy environment for increased investment, job creation, and overall economic stability.

He emphasized that this growth in the non-oil sector is particularly important given the current context of reduced oil production and falling global oil prices. With oil revenues under pressure, the strong performance of the non-oil private sector acts as a buffer, helping mitigate the potential impact on the country's economic conditions.

Al-Ghaith continued, noting that diversifying income sources is essential to maintaining growth amid the volatility of oil markets. He explained that increased production levels not only enhance the competitiveness of Saudi companies but also encourage developments aimed at expanding the private sector's participation in the economy.

This shift, he said, provides a more stable foundation for long-term growth, making the economy less susceptible to oil price fluctuations.