RIYADH: Saudi banks provided $247 million loans to 1,113 small and medium enterprises (SMEs) during the period 2006-2010, an expert on development and management said.
Khalid Al-Yahya, head of management and governance at Arizona University and Dubai Management College in a lecture at Riyadh Chamber of Commerce and Industry (RCCI) organized by the SME committee, said the number of guarantees approved for SMEs within Kafala program stood at 1,668 at a total cost of $172 million in the period mentioned above.
More than half of the SME firms ,or 54 percent, will require additional loans ranging between $50,000-$150,000 for each due to expansion and growth of Saudi economy, he said.
The expert predicted that 53 percent of the SME firms will ask for more than $ 500,000 whereas 22 percent will require more than one million dollars to meet expansion of business.
He said a number of SME owners in the Kingdom who tend to ask funding from retail financiers are paying higher interest rates that may exceed 20-25 percent.
The volume of Saudi bank's loans to the SME sector is less than 4% of the gross domestic product (GDP) and represent 2 percent of total loans, he said.
The SME sector represents nearly 96 percent of total businesses in the Kingdom and its share accounts for 28-33 percent of GDP where 85-90 percent staff are dominated by foreign workforce, he said.
The expert said most of Saudi SMEs are small scale firms based on the number of workers.
SME firms are facing a series of challenges including absence of regulatory environments that could allow registering of guarantees, application of regulations for who fail to pay back loans in addition to absence of financial statements, skilled manpower and shortage of data on markets, he noted.
The expert also made a comparative approach on the reality of SMEs in the Kingdom, the United Arab Emirates (UAE) and Jordan saying they face similar obstacles, particularly what is related to funding, guarantees and high interest rates.
For his part, head of SME Committee at RCCI Khalaf Al-Shammari called on SME owners to surpass the issue of funding and pursue their projects and get benefited from infrastructure and good business atmosphere provided by the government of Custodian of the Two Holy Mosques King Abdullah.
Concerned parties have always shown sincere care for the SME sector and the RCCI, in its part, has a number of initiatives with such parties to develop SME reality and remove obstacles facing it, Al-Shammari pointed out..
© Arab News 2012
