Saudi credit to SMEs up 11.5%, startup funding up 145%

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• Small businesses funding 8.2 percent of total financial sector credit
• Startups in the kingdom raised over $500 million in Q1 of 2022

Credit provided by Saudi financial institutions to small businesses rose by 11.5 percent last year, while funding raised by startups in the kingdom is up 145 percent this year, as the Riyadh government continues to encourage the development of the country’s local business community.

Credit awarded to Saudi micro, small and medium-sized enterprises reached 203.25 billion Saudi riyals ($54.2 billion) in the fourth quarter of 2021, a year-on-year rise of 11.5 percent, according to the latest figures from the Saudi Central Bank (SAMA). 

Micro enterprises are classed by the Saudi Small and Medium Enterprises General Authority as a business with five or less employees and annual revenue of less than three million Saudi riyals. This sector saw a sharp rise in credit provided, up 27 percent year-on-year in 2021. Small enterprises, which are classed as between six and 49 employees, and with annual revenue of between three and 40 million Saudi riyals, also saw a surge of 27.1 percent year-on-year in 2021, according to the SAMA figures.

Saudi Arabia’s pace of growth when it comes to its startup ecosystem has been astonishing

Triska Hamid, editorial director at Wamda

The monthly data showed that funds lent to small businesses now represent 8.2 percent of total credit allocated by the financial sector in the kingdom, up from six percent in 2018. This is likely to continue growing as SAMA announced in March an extension to its guaranteed financing programme for micro, small, and medium enterprises. Introduced in March 2020 during the Covid pandemic, the scheme has now been extended until March 14, 2023.

As part of the government’s drive to support small businesses in the kingdom and stimulate an environment of entrepreneurship, data compiled by Wamda, the largest early-stage investment fund in the Middle East, found that Saudi Arabia was one of the standout performers in the region and was currently enjoying triple digit growth in investment into startups.

“Saudi Arabia’s pace of growth when it comes to its startup ecosystem has been astonishing. From January to April this year, startups in the country have raised over $500 million, that’s a growth rate of 145 percent compared to the same period last year,” Triska Hamid, editorial director at Wamda, told AGBI.

“Investors in Saudi have also become the region’s most active and will likely remain this way until they begin to feel the effects of the crashes in the global markets,” she added.

Faisal Alqarni, co-founder and chief strategy officer at Riyadh-based finance startup Malaa, which was founded in late 2020, echoed this sentiment and said obtaining funding for startups and small businesses in the kingdom was “getting easier every day”. 

“The vision is changing and reforming a lot in the kingdom, and SMEs [small and medium-sized enterprises] are a big part of it, from increasing their contribution to the overall GDP to enhancing the business practices and ease of doing business index down to support from different ecosystem developers,” Alqarni told AGBI.

“Lending and investment for SMEs, especially venture capital investment is increasing year-on-year significantly, where Saudi is on its way to becoming the regional hub for attracting investment and financing. There are many plans to attract more funding such as establishing SEZs (special economic zones) that will greatly impact the policies and procedures,” he added.