“Banks are not lending to any startups without providing annual financial statements audited by licensed entities in Saudi Arabia,” said Al-Hazmi, co-founder of Riyadh-based Supply & Logistics Solutions that started operations last year providing storage and cargo services. “How would I be able to provide a bank with statements if I just started?”
Lending under the nation’s SME Loan Guarantee Program, also known as Kafalah, plunged 76 per cent to SAR 572 million ($153 million) last year as banks tightened rules, according to data from the Saudi Industrial Development Fund. That compares with a 12 per cent increase for total bank credit last year to SAR 1.25 trillion, according to Saudi central bank data.
“Banks in Saudi Arabia find it challenging servicing the SME market,” Yahya Alyahya, chief executive officer of Bahrain- based Gulf International Bank, which is majority owned by Public Investment Fund of Saudi Arabia, said in an e-mail on 24 February. “SMEs tend not to have reliable financial information, specifically audited financial accounts.”