\n\tRIYADH: Saudi finance companies\u2019 outstanding credit reached SR99.37 billion ($26.5 billion) at the end of the second quarter of 2025, marking a 10.2 percent increase compared to the same period last year.<\/p>\n
\n\tAccording to latest data from the Saudi Central Bank, also known as SAMA, this figure represents only about 3.12 percent of the total financing extended by the Kingdom\u2019s commercial banks, underscoring the still-modest but growing footprint of non-bank lenders in the financial system.<\/p>\n
\n\tPersonal loans and auto financing dominated the portfolio of these companies, reflecting their consumer-centric focus. Individual finance accounted for the largest share at around 29 percent of total credit facilities, roughly at SR28.7 billion.<\/p>\n
\n\tAuto financing was the second-biggest segment at about SR25.93 billion, followed closely by residential real estate loans, which comprised 23 percent or approximately SR23 billion of the total.<\/p>\n
\n\tOther, smaller lending activities registered even faster year-on-year growth, albeit from a lower base. Credit card finance, for instance, jumped by about 31.5 percent over the year to reach SR2.12 billion, making it one of the fastest-growing segments.<\/p>\n
\n\tCommercial real estate financing also saw a robust annual uptick of 22.8 percent, climbing to SR5.66 billion, as finance companies increasingly catered to property developers and businesses outside the traditional banking sector.<\/p>\n
\n\tLoans classified under \u201cother\u201d rose by 14 percent to SR14.04 billion. This broad-based growth across categories indicates strong borrower appetite and an expanding role for finance firms beyond their core personal and auto loan offerings.<\/p>\n
\n\tAccording to SAMA\u2019s breakdown, the retail sector took the lion\u2019s share of finance company lending, accounting for about 77 percent of total outstanding credit by these firms.<\/p>\n
\n\tSAMA had noted in 2024 in its Financial Stability Report that such concentration presents a risk exposure, though roughly half of those retail loans are to public sector employees with stable incomes, which helps mitigate default risk.<\/p>\n
\n\tSupport for businesses \u2014 especially smaller enterprises \u2014 is a significant part of finance companies\u2019 mission. Micro, small, and medium-sized enterprises together received nearly 19 percent of finance company credit as of the quarter, which is nearly double the proportion that SMEs typically represent in bank lending portfolios.<\/p>\n
\n\tThis underscores how non-bank lenders are closing the SME financing gap and supports Vision 2030\u2019s diversification agenda, which seeks to broaden consumer and SME access to credit and lift SMEs\u2019 share of bank lending to 20 percent by 2030.<\/p>\n
\n\tBy contrast, large corporates outside the SME category accounted for only about 4.4 percent of finance company credit, as big firms continue to rely mostly on banks or capital markets for their funding needs.<\/p>\n
\n\tKey role for consumers<\/p>\n
\n\tFinance companies have become pivotal in expanding credit access to Saudi consumers and SMEs, complementing banks by serving niche segments and underserved borrowers.<\/p>\n
\n\tThough their loan book is only a fraction of the size of banks\u2019, Saudi finance companies play an outsize role in financial inclusion. They are non-deposit-taking institutions that often serve niche markets and borrowers not fully reached by traditional banks.<\/p>\n
\n\tIn recent years, these firms have been instrumental in extending credit to underserved segments \u2014 from lower-income individuals seeking personal or installment loans, to entrepreneurs and small business owners who may lack the collateral or credit history to obtain bank financing.<\/p>\n
\n\tThe growing activity of finance companies, alongside new fintech lending platforms, is viewed as crucial to bridging this gap.<\/p>\n
\n\tThese non-bank finance firms also complement banks by taking on business models that banks might not pursue, such as leasing, microfinance, and buy now, pay later services.<\/p>\n
\n\tAs most Saudi finance companies are not allowed to take customer deposits, except in limited cases with SAMA\u2019s prior approval, they fund their books largely through shareholder capital and wholesale funding which are bank credit lines and, where approved, sukuk or bond issuance, supplemented by retained earnings.<\/p>\n
\n\tThis structure tends to make their cost of funds higher than deposit-funded banks, so pricing and product design are calibrated to risk and speed, especially in the consumer, auto, and SME niches where exposures are often partially unsecured.<\/p>\n
\n\tTheir presence introduces more competition and choice in the credit market, provifing consumers with additional options for car loans or credit cards, and offering small businesses alternative financing when bank loans are out of reach.<\/p>\n
\n\tEven though these companies\u2019 overall market share is small, their impact on niche lending segments is significant, providing tailored financial solutions that complement the services of mainstream banks.<\/p>\n
\n\tTheir rapid growth in recent years has been underpinned by regulatory reforms and fintech innovation.<\/p>\n
\n\tSAMA leading the way<\/p>\n
\n\tSAMA has actively encouraged the expansion of this sector as part of the Financial Sector Development Program. A notable step came in January 2023, when the regulator halved the minimum paid-up capital requirement from SR100 million to SR50 million for new finance companies focusing on SME lending.<\/p>\n
\n\tThis move aimed to attract investors and enable more specialized lenders to launch operations targeting small businesses. Additionally, SAMA opened the door for new business models by licensing the first debt-based crowdfunding platforms and setting a low SR5 million capital threshold for BNPL providers, fostering a wave of fintech entrants.<\/p>\n
\n\tSince 2022, rules have also been eased to allow finance companies to engage in multiple financing activities, such as consumer finance, real estate lending, and SME finance under one roof, rather than be restricted to a single line of business.<\/p>\n
\n\tAs a result of the pro-growth regulatory environment, the number of licensed finance companies in the Kingdom has climbed significantly. By the end of 2024, SAMA had authorized 62 finance companies operating across personal finance, mortgage, leasing, and fintech lending segments.<\/p>\n
\n\tThat momentum has continued into 2025 with SAMA\u2019s latest licensing notice in September stating that, with the licensing of Muhlah Zamaniyah for consumer microfinance, \u201cthe total number of finance companies licensed by SAMA\u201d reached 68.<\/p>\n
\n\tLooking ahead, Saudi finance companies are poised for further expansion in line with the Kingdom\u2019s Vision 2030 ambitions. Their agility in deploying fintech solutions, from instant consumer loans via mobile apps to revenue-based financing for startups, gives them an edge in reaching customer segments that value speed and flexibility.<\/p>\n
\n\tAt the same time, prudent oversight by SAMA, including updated governance and risk management frameworks, is helping ensure the sector grows sustainably.<\/p>\n
\n\tWith continued policy support and innovation, these non-bank lenders are set to deepen their role in Saudi Arabia\u2019s credit market, gradually increasing their 3 percent slice of the pie while empowering more consumers and entrepreneurs with access to financing.<\/p>\n","protected":false},"excerpt":{"rendered":"
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