Lack of funding puts Saudi SMEs at risk: official

A “huge gap” remains in funding available to Saudi small and medium enterprises (SMEs), even as the kingdom seeks to boost the sector under planned economic reforms, Mazen Aldawood, deputy governor of the General Authority for Small and Medium Enterprises (SMEs), told Argaam.

Saudi Arabia is working to tackle the funding challenge, Aldawood said, adding that an SAR 4 billion fund was established earlier this year to support SME creation and develop the venture capital industry.

The kingdom’s Public Investment Fund and the Ministry of Commerce and Investment (MCI) set up the fund, with the aim of creating more jobs and diversifying the economy in the wake of the oil slump.

Half of the SAR 4 billion will be allocated toward private equity, while the other SAR 2 billion will go towards venture capital, Aldawood said. The government also hopes to attract more equity and strategic investors to the SME sector through the creation of the fund.

“We have to ensure we have the whole product portfolio for funding these SMEs on the whole journey,” the deputy governor said in an interview during the ArabNet conference in Riyadh.

The SME authority is also closely working with the Saudi Arabian Monetary Authority (SAMA) and banks in the kingdom to increase funding available to smaller companies, in line with goals outlined under Vision 2030.

Under the reforms, the Saudi government aims to see financial institutions allocate up to 20 percent of overall funding to SMEs by 2030, from less than 5 percent presently.

“We believe we are on good track today with SAMA and the national banks to start expanding the debt forward to the national SMEs,” Aldawood said.

Apart from funding, another key obstacle facing SMEs is having to deal with cumbersome regulations.

The authority now is reviewing laws and gaps in the existing policy framework to improve the regulatory environment for smaller companies, Aldawood said.

As part of these efforts, the organization is working with the MCI to roll out a new bankruptcy law, which will benefit SMEs as well as the wider private sector.

Overall, the authority currently has over 100 initiatives in place to be executed over the next four years to boost growth in SMEs, enhance their productivity, and increase the number of Saudis employed in the sector.

“We are very optimistic that these initiatives will fill the gap in the national SME ecosystem,” Aldawood said. “Today, we have more than 6.5 million employed in SMEs, but the penetration of Saudis is very low.” 

Write to Jerusha Sequeira at jerusha.s@argaamnews.com