The Saudi Central Bank (SAMA) has announced a change to an existing law which reduces the minimum paid-up capital required for finance firms that specialize in financing and supporting small and medium-sized enterprises (SMEs) to $13.3 million (SR50 million).

The amendment to the Implementing Regulation of the Finance Companies Control Law aims to further develop Saudi Arabia’s SME sector and attract more investors to the sector.

Easier access to capital for SMEs

One of the main benefits of this amendment is that it will make it easier for SMEs to access funding and financing. With the lower minimum paid-up capital requirement, more finance companies will be able to specialise in financing SMEs, which will increase the availability of funding options for these businesses. This is crucial for the growth and development of SMEs, as access to funding is often cited as one of the main challenges faced by these companies.

Attracting more investors

The amendment will also help to attract more investors to the Kingdom’s SME sector. By making it easier for finance companies to specialize in financing SMEs, more investors will be drawn to the sector, which will increase the overall amount of capital available for SMEs to access.

With proper financial support and advisory services – such as the National Industry Strategy – SMEs will have the opportunity to achieve long-term success and overcome the challenges faced, according to a report released in 2022 by multinational professional services network KPMG.

Diversifying from oil revenue

Omar Alhalabi, Director of the Global Strategy Group at KPMG in Saudi Arabia, shares:

“As Saudi Arabia looks to diversify its sources of revenue, grow its non-oil-based economy and increase the contribution of SMEs and the industrial sector to the GDP, supporting emerging industrial enterprises in the country will be vital.”

Furthermore, this amendment will play a significant role in achieving Saudi Arabia’s objectives of lowering the unemployment rate from 11.6 percent to 7 percent, and increasing women’s participation in the workforce from 22 percent to 30 percent. As SMEs are the key generator of new employment, it will help to create more job opportunities for citizens which in turn will lead to a more stable and sustainable economy.

This amendment will benefit the Saudi Arabia’s economy by providing more funding options for SMEs, attracting more investors to the financial sector, helping SMEs to achieve long-term success, creating more job opportunities and helping the country to achieve its Vision 2030 goals.