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The growth of credit facilities extended to micro, small, and medium enterprises (MSMEs) in Saudi Arabia is a testament to the Kingdom’s commitment to economic diversification under Vision 2030. In the second quarter of 2024, MSME lending increased by 17.04 percent year on year, reaching SR307.4 billion ($82 billion). Saudi banks provided 94 percent of these credit facilities, while finance companies accounted for the remaining 6 percent. This sector’s share of bank and finance company lending portfolios underscores the government’s encouragement for financial institutions to allocate at least 20 percent of their loan portfolios to MSMEs.
Medium-sized enterprises received the largest share of financing, amounting to SR167.31 billion (54 percent of the total), while micro enterprises saw a notable 45.53 percent growth, bringing their credit share to SR33.7 billion. Small enterprises, which make up 35 percent of the MSME financing, experienced a 26.84 percent increase in lending, totaling SR106.39 billion.
This growth is fueled by Saudi Arabia’s push to reduce its dependence on oil revenues, with increasing demand for MSMEs in sectors such as entertainment, hospitality, sports, and retail. The government has also implemented various initiatives, like the Kafalah Program, which plays a crucial role in enabling access to finance for MSMEs, especially in the non-oil sector. This financial support helps foster sustainable economic development by empowering private enterprises.
Monsha’at, a key player in supporting MSMEs, has significantly contributed to this ecosystem by enhancing access to finance, promoting entrepreneurship, and advocating for regulatory reforms. Their efforts have led to a 78 percent year-on-year growth in commercial registrations in Q2 2024, with 45 percent of these attributed to female-owned businesses. Riyadh, Makkah, and the Eastern Province account for the majority of active registrations.
The rise of financial technology (fintech) has also played a pivotal role in supporting MSME growth. With initiatives from SAMA and the Capital Market Authority, the fintech ecosystem has flourished, culminating in milestones like the first fintech IPO for Rasan. The Kingdom is now home to over 216 fintech companies, reflecting strong investor interest and a booming venture capital landscape. Programs like the Fintech Lab and the upcoming Open Banking Lab are set to enhance collaboration between banks and startups, while the Makken Program will help reduce compliance costs for startups.
Overall, Saudi Arabia’s MSME sector continues to expand, driven by robust government support, fintech advancements, and a dynamic private sector. This sector remains crucial to the Kingdom’s economic transformation goals.