Saudi Central Bank extends pandemic loan scheme to support businesses

By Rahul Vaimal, Associate Editor
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Saudi Central Bank
Saudi Central Bank

The Saudi Central Bank, previously known as Saudi Arabian Monetary Authority (SAMA) has extended a loan deferral scheme to support small businesses deal with the fallout of the coronavirus pandemic until the end of the first quarter of next year.

The monetary authority told that the program has impacted over $20.5 billion (SAR77 billion) of loans and that the extension was taken to help sustain economic development. The scheme was announced in March as one of the kingdom’s first responses to the economic costs of the health emergency. Initially, the scheme was planned to expire in  December this year.

The central bank has been at the lead of the kingdom’s efforts to safeguard the economy at a time when the government is set to cut spending to stop the budget deficit from increment.

Last week the mandate of the Saudi Central Bank was extended to formally include support for economic development, partly in recognition of the position it has already played. The central bank expanded similar stimulus initiatives in the neighboring United Arab Emirates through June 2021.

According to the estimates of Bloomberg Intelligence, the research division of Bloomberg, Saudi policymakers gave over $30 billion (SAR114 billion) in free deposits to local lenders in liquidity injections and to meet the costs of loan deferrals for small businesses which are affected by the pandemic.

Under the payment deferral scheme, lenders can use central bank funds to cover any costs resulting from the granting of repayment holidays to clients who need to restructure loans because of the coronavirus effect.

The program helped banks avoid having to recognize credit as non-performing. Still, as per the official reports, profits across Saudi banks are almost 30 percent lower for the year until September than in the same period of 2019. Loans categorized as non-performing loans grew at the end of June to 2.3 percent of the total, the highest amount since 2011.