SME Financing Moves to the Core of Saudi Arabia’s Non-Oil Economy

A night view of Riyadh, Saudi Arabia (SPA file)
A night view of Riyadh, Saudi Arabia (SPA file)
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SME Financing Moves to the Core of Saudi Arabia’s Non-Oil Economy

A night view of Riyadh, Saudi Arabia (SPA file)
A night view of Riyadh, Saudi Arabia (SPA file)

In a sign of a deep shift in the structure of financing within Saudi Arabia’s economy, and reflecting the goals of Vision 2030 to diversify the production base, credit facilities extended to micro, small and medium-sized enterprises reached a record high at the end of 2025.

Banks and finance companies injected around SAR 467.7 billion ($124.5 billion) into the sector last year, marking a 33 percent annual increase. The surge highlights the transition of these enterprises from the margins of economic activity to the center, positioning them as a key driver of non-oil growth and job creation.

On a yearly basis, total facilities rose 33 percent from about SAR 351.7 billion ($93.6 billion) in 2024, according to monthly bulletin data from the Saudi Central Bank (SAMA).

The banking sector accounted for the largest share, with facilities provided by banks reaching approximately SAR 446.6 billion, up 34 percent year on year. Finance companies contributed around SAR 21.1 billion, an annual increase of 15.4 percent.

By enterprise size, growth rates varied. Lending to medium-sized firms rose 18 percent year on year to SAR 220.9 billion. Small enterprises recorded stronger growth of 34 percent, reaching SAR 163.5 billion. Micro-enterprises saw the sharpest increase, with facilities surging 97 percent to SAR 83.3 billion, underscoring a notable expansion in financing to this segment.

Structural shift

The strong growth has been driven by several factors, most notably the clear strategic direction under Vision 2030, which places SMEs at the heart of economic diversification, along with the expanding role of institutions supporting the sector.

Among these is Monsha’at, which has helped improve the business environment and connect enterprises with funding sources, according to economist Hussein Al-Attas.

“This level of facilities is not just a record figure. It reflects a structural shift in the philosophy of financing within the Saudi economy,” Al-Attas told Asharq Al-Awsat.

He identified four main drivers behind the growth: a clear economic vision, a stronger regulatory environment, the expansion of credit guarantee programs, and a shift in how banks view the SME sector.

The Kafalah program has been particularly important, helping reduce lending risks and enabling banks to increase exposure to SMEs. This has coincided with improvements in financial data quality and governance practices, which have strengthened lenders’ confidence in the sector.

Sustainable growth

Al-Attas said the current trend reflects not a temporary expansion in credit but a redefinition of the role of SMEs in the economy, with growth expected to continue over the medium term.

However, he pointed to several challenges that could affect the pace of expansion. These include limited managerial expertise in some firms, the risk of defaults if financing is poorly managed, concentration of lending in specific sectors, and the potential impact of future interest rate increases.

Authorities are aware of these risks. This is reflected in a growing focus on improving governance, strengthening management efficiency, and linking financing more closely to actual operating performance to ensure funds are directed toward sustainable and productive activities.

The importance of this expansion extends beyond the headline figures. It supports a higher contribution of SMEs to non-oil GDP and plays a central role in job creation, given the sector’s labor-intensive nature.

According to Al-Attas, the growth also strengthens economic diversification by supporting the entry of new firms into promising sectors such as technology, industry, and services. It also increases local value added and reduces reliance on imports and large corporations.

Looking ahead, he expects financing growth to continue at a healthy pace over the next three to five years. This outlook is supported by the expansion of digital financing solutions, continued integration between government and banking sectors, and improving market maturity and enterprise quality. Large-scale projects and non-oil expansion are also expected to create new financing opportunities, gradually shifting the focus from the volume of funding to the quality of its economic impact.

Digital transformation

Mohammed Al-Farraj, senior head of asset management at Arbah Capital, said the development reflects alignment between ambitious government policies aimed at raising SMEs’ contribution to GDP to 35 percent and a responsive banking sector that has led the growth and captured the largest share of financing.

He noted that guarantee and incentive programs, as well as the SME Bank, have played a key role in reducing credit risks and boosting banks’ willingness to lend.

Digital transformation and the rise of fintech companies have also marked a turning point by improving access to financing and lowering operating costs. This has created a more flexible and attractive environment for business growth beyond traditional constraints.

Despite these positive indicators, Al-Farraj cautioned that rapid expansion requires strategic vigilance, particularly regarding credit risks and potential defaults amid interest rate volatility and increased competition in sectors such as retail.

He continued that the next phase will require a shift from quantitative growth, focused on expanding financing volumes, to qualitative growth that emphasizes credit quality, project sustainability, and resilience to economic changes.

Alternative financing tools such as venture capital are expected to play a growing role. These tools can ease pressure on bank balance sheets while directing funding toward strategic sectors including technology, tourism, and industry to ensure meaningful value creation in the national economy.

Developments seen in 2026 suggest early returns from this expansion. These include the emergence of a new generation of high-growth firms, increased SME contribution to non-oil exports, and greater use of instruments such as sukuk tailored for SMEs as a cost-effective long-term financing option.

Al-Faraj said SMEs are no longer a peripheral segment but a central driver of innovation and growth in Saudi Arabia’s economy. Sustaining this momentum will require continued regulatory development and more flexible repayment mechanisms to ensure durable growth aligned with long-term economic development goals.



SpaceX on Cusp of Record IPO that Could Make Musk a Trillionaire

FILE - SpaceX's mega rocket Starship prepares for a test flight from Starbase in Boca Chica, Texas, Monday, Nov. 18, 2024. (AP Photo/Eric Gay, File)
FILE - SpaceX's mega rocket Starship prepares for a test flight from Starbase in Boca Chica, Texas, Monday, Nov. 18, 2024. (AP Photo/Eric Gay, File)
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SpaceX on Cusp of Record IPO that Could Make Musk a Trillionaire

FILE - SpaceX's mega rocket Starship prepares for a test flight from Starbase in Boca Chica, Texas, Monday, Nov. 18, 2024. (AP Photo/Eric Gay, File)
FILE - SpaceX's mega rocket Starship prepares for a test flight from Starbase in Boca Chica, Texas, Monday, Nov. 18, 2024. (AP Photo/Eric Gay, File)

SpaceX enters the final stretch Thursday before its expected trading on Wall Street as part of the biggest initial public offering in history, which could propel co-founder Elon Musk to trillionaire status.

The company will be the first out of the gates among the tech and AI giants eyeing public markets, with OpenAI and Anthropic expected to follow, as both have filed with regulators for their own market debuts, AFP said.

If all goes as expected, the space and rocket company co-founded by Musk in 2002 will begin trading on the Nasdaq exchange on Friday morning, with all eyes on how Wall Street will absorb the blockbuster IPO that could send tremors across global markets.

For high-profile companies, the first day of trading traditionally sees executives ring the opening bell to mark the start of the session -- in this case at New York's Times Square, home of the Nasdaq.

The IPO is Musk's biggest financial gamble yet, with his xAI company and the X social media platform (formerly Twitter) also included in the SpaceX offering after the multi-billionaire folded them into the company earlier this year.

The company will offer more than 555 million shares at an expected $135, placing SpaceX among Wall Street's most elite companies with a valuation of around $1.8 trillion.

The operation will become official on Thursday, including the pricing, with questions swirling over whether the company will raise its offer price amid reports that it attracted more than four times the available shares, according to Bloomberg.

Thirty percent of the shares will be reserved for retail investors, triple the amount that is typically allocated in IPOs, giving Musk fans a chance to fork over for a slice of the company.

- Data centers in space -

The success of the IPO rests squarely on investors' faith in Musk as a visionary entrepreneur. The tech multi-billionaire will serve as chief executive, chief technology officer and board chairman of the newly traded company.

The IPO is expected to mint thousands of new millionaires and many billionaires, with former and current employees -- and a long list of investors -- from the company's near quarter-century history looking to cash in.

The financials of the company are giving some on Wall Street pause, as the valuation largely depends on Musk delivering on promises worthy of science fiction, including putting data centers in space as well as people on Mars using as yet unproven technology.

While the company is growing fast -- revenue hit $18.7 billion in 2025 -- it is also losing money, producing a net loss of $4.9 billion.

In an extraordinary prediction, SpaceX's filing claims it can pull in over $28.5 trillion in revenue from its various markets.


ECB Set for 'Insurance Hike' as Iran War Fans Euro Zone Inflation

FILE PHOTO: Dark clouds are seen over the building of the European Central Bank (ECB) in Frankfurt, Germany, June 6, 2024. REUTERS/Wolfgang Rattay/File Photo
FILE PHOTO: Dark clouds are seen over the building of the European Central Bank (ECB) in Frankfurt, Germany, June 6, 2024. REUTERS/Wolfgang Rattay/File Photo
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ECB Set for 'Insurance Hike' as Iran War Fans Euro Zone Inflation

FILE PHOTO: Dark clouds are seen over the building of the European Central Bank (ECB) in Frankfurt, Germany, June 6, 2024. REUTERS/Wolfgang Rattay/File Photo
FILE PHOTO: Dark clouds are seen over the building of the European Central Bank (ECB) in Frankfurt, Germany, June 6, 2024. REUTERS/Wolfgang Rattay/File Photo

The European Central Bank is all but certain to raise interest rates on Thursday in the hope of nipping higher inflation in the bud before a surge in energy costs triggered by the Iran war spreads more broadly across the euro zone economy.

The well-telegraphed move would come as inflation in the 21-country currency bloc is already above 3%, well in excess of the ECB's 2% target, and economic growth is very weak - a backdrop that has economists split over the case for tighter policy.

ECB policymakers, some of whom had already pushed for action in April, are nonetheless expected to press ahead, seeking to keep a lid on inflation expectations and to safeguard their credibility after being slow to react to a post-pandemic inflation spike in 2022.

"The ECB needs to hike ‌to protect credibility ‌and prevent inflation expectations from de-anchoring, but it is still operating around neutral rather ‌than ⁠moving decisively into restrictive ⁠territory," Annalisa Piazza at MFS Investment Management said.

Thursday's hike would be the first in nearly three years and take the ECB's benchmark deposit rate to 2.25% from 2.0%. Sources have told Reuters the ECB is unlikely to commit to further rate rises this week but financial markets expect another two over the coming year, with the next move seen as soon as September.

The bank's new economic projections are also likely to hint at further rate hikes.

"New staff projections are likely to be consistent with three hikes and (ECB President) Lagarde is unlikely to dismiss this as unreasonable," JPMorgan's Greg Fuzesi said. "That would give the meeting a ⁠clear hawkish feel, even if the communication is likely to be more consistent with ‌the next move in September."

AN 'INSURANCE HIKE' THAT UNDERPINS EXPECTATIONS

Several ECB watchers have ‌characterized the expected move as an "insurance hike" - a precautionary step that could be reversed if price pressures fade.

Supporting the case for action, ‌the ECB is likely to raise its quarterly inflation projections on Thursday, bringing them closer to its "adverse" scenario published ‌in March, which saw inflation peaking at 4.2% in the final quarter of this year before falling back sharply in 2027. Consumers, companies and financial investors have revised their own views about price hikes, although medium-term expectations remain close to the ECB target and far from their levels in the aftermath of Russia's invasion of Ukraine.

"Two hikes this year thus looks like a minimum," Anatoli Annenkov at Societe ‌Generale said. "Markets are likely to start pricing in the next hike in July... but we still think a majority of governors would prefer to wait for more ⁠data and new forecasts in September."

HEADING ⁠FOR A POLICY MISTAKE?

Not all economists are convinced. Some warn the ECB risks tightening into an economy that is already paying a high price for the Iran war.

Berenberg's Holger Schmieding said the ECB was "heading for a policy mistake" given a stagnant labor market and weak consumer demand.

"Amid the ongoing destruction of demand, the inevitable temporary surge in prices ... seems unlikely to turn into a protracted inflation problem that would need to be addressed by higher rates," he wrote in a note. A Reuters analysis of earnings call transcripts by euro zone companies showed just 40% of those outside the financial sector had raised prices or were planning to do so, roughly half the share seen as the Ukraine war pushed up energy prices in 2022.

Eric Dor, director of economic studies at France's IESEG School of Management, said the ECB was overestimating its ability to influence household and business expectations, particularly in a situation where inflation is driven by fuel costs rather than domestic demand. But the ECB has sharpened its messaging in support of tighter policy. Chief Economist Philip Lane - typically seen as an inflation "dove" - has said the Iran-related shock may be broader in scope than the Ukraine crisis, as it affects global energy markets rather than primarily Europe.


Gold Rebounds from 6-month Low; Inflation Data in Focus

A vendor displays gold bracelets for sale at a gold shop in Istanbul's Grand Bazaar (AFP)
A vendor displays gold bracelets for sale at a gold shop in Istanbul's Grand Bazaar (AFP)
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Gold Rebounds from 6-month Low; Inflation Data in Focus

A vendor displays gold bracelets for sale at a gold shop in Istanbul's Grand Bazaar (AFP)
A vendor displays gold bracelets for sale at a gold shop in Istanbul's Grand Bazaar (AFP)

Gold prices rebounded from a six-month low on Thursday, as investors bought the metal at bargain prices while awaiting a key US inflation report that could shed more light on the Federal Reserve's policy outlook.

Spot gold rose 0.5% to $4,095.64 per ounce by 0558 GMT, after hitting its lowest since November 21 at $4,022.09 earlier in the day. US gold futures for August delivery were ⁠down 0.4% at $4,116.20, Reuters reported.

"With ⁠prices hurtling towards $4,000, it's an obvious level of support that could prompt bears to book a quick profit or tempt battered bulls from the sideline," said Matt Simpson, a senior analyst at StoneX.

"The US dollar index failed to gain much ground following Wednesday's CPI report. So, unless ⁠there are any nasty surprises in PPI (Producer Price Index) - gold could be due a technical bounce over the near term."

US consumer inflation increased at its fastest pace in three years in May, boosted by surging prices for energy products amid the Middle East conflict.

The May US PPI data is due at 1230 GMT.

Traders are pricing in a more than 70% chance of a US rate hike by December, according to the CME FedWatch tool.

The United ⁠States and ⁠Iran traded air attacks on Thursday for a second straight day, with US President Donald Trump vowing further strikes if Tehran did not immediately agree to a peace deal.

Oil prices climbed on Thursday, after Iran declared the closure of the Strait of Hormuz following US strikes.

Elevated crude oil prices can accelerate inflation, and while gold is viewed as a hedge against inflation, higher interest rates tend to weigh on the non-yielding metal.

Spot silver rose 0.4% to $63.95 per ounce, platinum gained 0.4% to $1,671.09, and palladium climbed 2.9% to $1,248.45.