SME Kafalah

Get required guarantees for funding

The small and medium-sized enterprises (SMEs) are usually unable, in most of its financial transactions with banks, to provide the sufficient guarantees in order to get the desired funding despite its economic feasibility. Therefore, Kafalah Program has been established with the support of the Ministry of Finance and banks operating in the Kingdom of Saudi Arabia; which its management was assigned to the Saudi Industrial Development Fund. The Program guarantees to the banks a proportion of the funding granted to the SMEs – for the purpose of enabling such enterprises to get the funding from the banks, as well as encouraging and urging the banks to fund such enterprises after verifying its economic feasibility..

Program Objectives

Program objectives

  • The development of the small and medium-sized enterprises’ sector to achieve its vital role in the national economy.
  • The optimal distribution of income among the community members.
  • Increasing the volume of the capital invested in the community.
  • Increasing the overall production’s volume.
  • Increasing the goods and services available in the market.
  • Achieving the integration with the large enterprises.
  • Developing the provinces of the less economic activities.
  • Increasing the volume of the non-traditional exports.
  • Employing a larger number of citizens and alleviating the unemployment in the community.
  • Attracting a new segment of enterprises’ owners who are not used to deal with the funders to take advantage of the services provided by these agencies.

Kafalah Terms & Conditions

  • Activites Guaranteed by the program
    • Different kinds of industry.
    • Activities that serve the agriculture sector.
    • Education.
    • Tourism and leisure.
    • Constructions.
    • Commerce.
    • Transport and communications.
    • Service activity.
    • Medical facilities.
    • Pharmacies.
  • Activities not guaranteed by the program
    • The activities that are not considered small or medium-sized that its annual sales volume exceeds SAR 30.000.000 (SAR Thirty Million).
    • The activities owned or denominated by the State.
    • The speculation actions (banking or real estate speculation or hierarchical selling plans), as well as the financing projects.
    • Any activity contrary to the laws and regulations in the Kingdom.
  • Conditions to be met in the guaranteed activity
    • The enterprise has a legal entity.
    • The enterprise is viable in the economic, financial, technical and administrative terms.
    • The enterprise contributes positively to the Saudi economy in terms of hiring and training the Saudi nationals, replacing the imported goods by the local ones and/or producing the high quality innovative goods and services.
  • Funding Purpose
    • Purchasing fixed assets and/or funding the working capital.
    • Kafalah Minimum & Maximum Limits
      • SAR 80,000.000 - SAR 1,600,000
    • Funding Minimum & Maximum Limits
      • SAR 100,000 - SAR 2,000,000
    • Kafalah Duration
      • The Kafalah is issued to be compatible with the funding duration and with a term up to 7 years (the term of Kafalah may be extended upon the request of the bank).
    • The funding form adopted by the program
      • The Program provides its Kafalah for all the kinds of funding in accordance with the Sharia-based funding forms allowed by the banks.
    • Required Docs
      • A data application form of the funding submitted by the borrowed enterprise.
      • Activity’s license.
      • A copy of the company’s memorandum of association (If the activity is a company).
      • A copy of the commercial register (If the project has not obtained a commercial register yet, it may provide a copy of the memorandum of association as a temporary measure for the companies).
      • A copy of the lease or ownership contract of the activity’s headquarters.
      • A copy of the national identity card/ residence card.
      • The economic feasibility study of the enterprise, if the activity is new or an expansion of an existing activity.
      • A copy of the audited financial statements for three years.
      • A copy of the enterprise’s subscription in the social security.
      • A copy of the ranges (Labour Office).
      • A copy of the certificate issued by the Department of Zakat.
      • The written consent of the activity’s owners to accept the Kafalah and his pledge to provide any guarantees required by the Program. These documents shall be provided to the bank at applying for the funding. Then, the bank shall provide the Program with such document attached with its approval of granting the required funding and the request of the Kafalah.
      All documents are to be shared with SME team by email on: SME_SalesTeam@alrajhibank.com.sa along with the KAFALAH Program form and activities Details filled out.

    Procedures of issuing the Kafalah

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      • The client shall submit, directly to the bank, a funding request attached with the following

      • The documents of the activity and any other documents required by the bank.
      • Kafalah application form (available at any of the bank branches).
      • The bank shall examine the clients’ request in accordance with the standards applicable in the bank.

        If the bank accepts to grant the required funding, the bank shall submit a request to the Program for issuing Kafalah for such funding, attached with the written consent of the activity’s owner to accept the Kafalah of the Program (according to a form to be obtained from the bank).

        The Program shall issue the required Kafalah to the bank, after assessing the request submitted by the bank and ensuring its consistency with the standards of the Program.

        The Program shall require the activity’s owner to provide, after examining the Kafalah's request, the guarantees deemed necessary by the bank (in favor of the Program), in addition to the personal guarantee of the enterprise’s owner, including the pledge on the assets.

    Frequently Asked Questions:
    Kafalah 

    • Does the Program grant funding to the SMEs?
      The Program does not grant the funding directly, but facilitates to the activity’s owner getting the funding required to his project from the banks participating in the Kafalah Program of the Small and Medium-Sized Enterprises through issuing Kafalah in favor of the bank, under which the Program guarantees a proportion of the funding
    • Who is entitled to apply for funding from the bank under the Program?
      Any small or medium-sized Saudi enterprise, joint with foreign investors or fully owned by foreign investors and registered within the Kingdom and its annual sales volume does not exceed SAR 30 Million is entitled to apply for funding from the bank under the Program.
    • What are the activities that the Program may guarantee its funding to the bank?

      The Kafalah Program’s system extends to cover all the activities in the economic sectors throughout the Kingdom, whether such activities are existing or new. For example:

      • Industrial activities with its different kinds.
      • Transport and communications.
      • Education.
      • Touristic and leisure activities.
      • Constructions.
      • Commerce.
      • Services.
      • Activities that serve the agriculture sector.
      • Medical facilities (private clinics – private hospitals – medical centers) and Pharmacies.
    • What are the activities that the Program does not guarantee its funding to the bank?

      The activities that are not considered small or medium-sized as defined in the above paragraph.

      • The activities owned or controlled by the State
      • The speculation actions (banking or real estate speculation or hierarchical selling plans), as well as the financing projects.
      • Any activity contrary to the laws and regulations in the Kingdom.
    • What are the conditions to be met in the activity funded by the bank and guaranteed by the Program?

      The enterprise has a legal entity (unincorporated enterprise, partnership company, joint stock company, etc.).

      • The project is viable in the economic, financial, technical and administrative terms.
      • The activity contributes positively to the Saudi economy in terms of:
        • Hiring and training the Saudi nationals
        • Replacing the imported goods by the local ones; and/or
        • Producing the high quality innovative goods and services
    • Can the same enterprise obtain more than one funding from the bank under the Program?
      The same enterprise can get more than one funding under the Program provided that the total Kafalah’s amount issued for such enterprise shall not exceed SAR 1.6 Million and the activity and affiliated and subsided activities shall be treated as a single unit. In case the client has more than one activity, and every activity has a legal entity independent of the other one, the Kafalah may be issued to cover the funding granted to each activity, provided not to exceed the amount of SAR 1.6 Million for each activity and the total Kafalah’s amount shall not exceed SAR 5 Million for the unincorporated enterprises and SAR 10 Million for the companies (limited liability, joint stock, etc.).
    • What are the documents required by the bank from the SMEs in order to issue the Kafalah?

      A data application form of the funding submitted by the borrowed enterprise.
      Activity’s license.
      A copy of the company’s memorandum of association (If the project is a company).
      A copy of the commercial register (If the project has not obtained a commercial register yet, it may provide a copy of the memorandum of association as a temporary measure for the companies).
      A copy of the lease or ownership contract of the activity’s headquarters.
      A copy of the national identity card/ residence card.
      The economic feasibility study of the enterprise.
      A copy of the audited financial statements for three years.
      A copy of the enterprise’s subscription in the social security.
      A copy of the ranges (Labour Office).
      A copy of the certificate issued by Department of Zakat.
      The written consent of the activity’s owners to accept the Kafalah and his pledge to provide any guarantees required by the Program.
      These documents shall be provided to the bank at applying for the funding. Then, the bank shall provide the Program with such documents attached with its approval of granting the required funding and the request of the Kafalah.

    • What are the maximum and minimum limits of the funding amount obtained by the enterprise from the funders under the Program?
      The maximum limit of funding amount eligible for Kafalah is SAR 2 Million and the minimum limit is SAR 100.000.000.
    • What are the maximum limit and minimum limit of the Kafalah?
      What are the maximum limit and minimum limit of the Kafalah? 80% of the total funding eligible for the Kafalah, with a maximum limit of SAR 1.6 Million and a minimum limit up to SAR 80.000.000.
    • What are the facilities (types of funding) guaranteed by the Program?

      The Program guarantees all the types of credit facilities granted by the banks to the SMEs according to the Sharia-based funding forms allowed by the banks. For example:
      Short, medium and long- term funding;
      Facilities to issue the letters of guarantee with all its types;
      Facilities to open documentary letters of credit for import

    • What is the purpose for which the funding is granted under the Program?

      The funding is granted under the Program for the following purposes:
      Purchasing fixed assets; and/or
      Funding the working capital

    • Does the Program guarantee the personal funding to purchase a car, residential apartment, land or residential building?
      The Program does not guarantee the funding granted for such purposes
    • What is the maximum limit of the funding duration, grace period and funding cost guaranteed by the Program?
      The term of funding, grace period and funding cost shall be determined by the bank in accordance with the study of the expected cash flow of the project, noting that the maximum duration of the funding guaranteed by the Program is 7 years.
    • What are the guarantees required by the banks and Program?

      The banks may request guarantees as it deems appropriate and enable them later to satisfy its rights at the borrowed enterprises. As the program may, after examining the Kafalah request of the enterprise and submitted by the bank, require the enterprise’s owner/s to provide any guarantees (in addition to the personal guarantee of the enterprise’s owner) of the Program, such as:

      Personal guarantees (or corporate).
      Pledging the fixed assets of the project.
      Pledging the other private properties of the activity’s owner.