Riyad Bank, the third largest bank in Saudi Arabia, is working to increase the share of financing for small businesses from 20 percent in 2011 to 25 percent to 2012.
Financing for small businesses by Riyad Bank was SR1.7 billion ($450 million) in 2011. The bank wants to increase this number SR2.25 billion this year as part of its commitment to supporting small business, which struggle to find financing from Saudi banks.
Senior vice president of the bank, Hisham al-Abdali, said that the bank’s financing portfolio had reached SR3.2 billion in four years of activity. He added that the bank has ambitious objectives in this area for the near future.
The bank’s decision to increase its financing of small businesses to 25 percent of total is primarily driven by the low improbability, nearing 0.5 percent, that such businesses won’t pay back their loans.
Small and medium-sized enterprises (SMEs) in Saudi Arabia have been receiving increasing attention from officials and financial institutions, which have only started to realize the critical importance of theses businesses as drivers of economic growth and a pillar of the economy. It is for this reason that officials from the Saudi Institute of International Finance have indicated that their organization will support this sector.
Saudi Arabia has taken a number of measures to support SMEs in light of its ongoing efforts to diversify its oil-dependent economy. The government is conscious of the importance of this sector in absorbing the growing number of Saudi jobseekers. Unemployment in the country reached 10.5 percent in 2011.