Saudi Arabia’s credit support for SMEs surged in 2020 amid COVID-19: SAMA

By Amirtha P S, Desk Reporter
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In 2020, Saudi Arabia witnessed an increase in financing provided to small and medium-sized enterprises (SMEs) by the Kingdom’s banks and financial companies despite the economic impact of the pandemic, according to recent official data.

The Saudi Central Bank (SAMA) in late January issued the total amount of credit awarded to SMEs in the third quarter of 2020 which amounted to $46.99 billion, up from $306 million in Q3 2019 and $282 million in Q3 2018. While the total figure rose 8.3 percent in 2019, it increased 52.4 percent in 2020.

In the companies monitored by SAMA, the biggest increase was for micro-companies which saw a rise of 89 percent in the total credit awarded to them. The figure for small and medium companies rose by 58.9 and 48.4 percent, respectively.

Further, the SAMA data reveals that 93.6 percent of the credit for SMEs was provided by the banks, with the remainder coming from other financial companies. The report also adds that in Q3 2020 SMEs account for 8 percent of banks’ lending which is up from 5.8 percent in Q3 2018.

Commenting on the results, Wassim Basrawi, managing director for Wa’ed, the entrepreneurship arm of Saudi Aramco, stated “These new statistics confirm the growing confidence we also share at Wa’ed in the dynamic resilience that is being demonstrated by Saudi start-ups during the COVID pandemic.

Last month, Wa’ed reported that it had tripled the amount of money loaned to startups in Saudi Arabia last year. The initiative gave out 12 loans to SMEs, up from four in 2019, with the value surging to $8million, up from $2.67 million in 2019.

Mr. Basrawi also confirmed that Wa’ed is planning to double its deal volume in the next three years with an aim to meet the increasing demand for financing by SMEs. Since its establishment in 2011, Wa’ed has deployed over $99 million to startups in Saudi Arabia.

A new industry report released last month also revealed that Saudi Arabia posted a 35 percent year-on-year increase in the number of investment deals in the technology startup sector in 2020. A study by data research platform Magnitt found that the Kingdom accounted for 18 percent of the 496 investment deals across the Middle East and North Africa (MENA) region last year.

The Magnitt study identified a change in the allocation of capital away from early-stage ventures. The deal sizes of pre-seed investments of less than $100,000 represented 47 percent of transactions in 2019, while in 2020 it fell to 27 percent. This shows that last year investors were showing a preference for bigger-ticket Series A investments between $100,000 and $3 million.