Business Portfolio Review

MSME Business

Supportive infrastructure for MSMEs

The Kingdom’s MSME sector showed signs of growth and recovery in 2021, emerging positively from the pandemic as one of the top sectors to benefit from government subsidies that extended well into 2021. With a Vision 2030 goal to increase the contribution to GDP of these enterprises to 35%, the Kingdom also encouraged micro financing, especially for start-ups and entrepreneurs, a trend that is expected to continue with MSMEs exempted from commerce fees register for three years as the Kingdom plans to boost the number of start-ups in the economy.

Disclosure of micro, small and medium enterprise financial services

Al Rajhi Bank established a dedicated Small and Medium Enterprise (SME) Business to provide the best financing solutions and banking facilities, having recognised such enterprises as significantly important agents of economic growth across the Kingdom. Today, the Bank services SMEs, as well as micro (ultrafine) business through its Micro and Small Business unit (MSB), offering further customised solutions and financing support to entrepreneurs and start-ups in a recovering economy.

Qualitative disclosure

The approved definition of micro, small and medium enterprises and initiatives adopted by the Bank follows the classifications published by Monsha’at – the General Authority for Micro, Small and Medium Enterprises of the Kingdom:

• Micro (Ultrafine): 1-5 fulltime employees with annual revenues less than SAR 3 Mn.
• Small: 6-49 fulltime employees with annual revenues between SAR 3 Mn. to SAR 40 Mn.
• Medium (Average): 50-249 fulltime employees with annual revenues between SAR 40 Mn. to SAR 200 Mn.

Al Rajhi services micro businesses through its MSB unit, and collectively services small and medium enterprises under its SME unit.

Strategic initiatives taken to support the MSME segment

• Providing incentives throughout the year including the extension of deferred payment programmes until March 2022, extension of working capital to clients to cover their short-term liquidity requirements, and waiver of digital banking fees during the impact period.
• Enhancing the acquisition and service delivery model to improve customer acquisition, supported by a simplified Credit Approval (CA) template to include only critical and relevant information to enable faster decision-making.
• Restructuring of MSB unit into a credit factory model, with all applications processed through a centralised team, significantly accelerating bookings of applications.
• Focusing on structured products and secured lending for SME clients to improve non-performing loan (NPL) ratios, while also improving remedial infrastructure to manage and recover special assets.
• Revamping Point of Sale (POS) financing product as well as its Fleet Financing programme to better suit SME Business requirements.
• Utilising other available channels to book MSB customers including direct sales, corporate sellers and via branches.
• Introducing a dedicated call centre for MSB customers was introduced during the year under review to manage customer queries and complaints, further enhancing Al Rajhi Bank customer experience.
• Implementing more efficient account planning techniques and improving the Bank’s MSME portfolio management processes to understand and serve clients better.
• Allocating two dedicated toll free numbers for MSB and SME customers respectively, to respond to customer queries, enhance customer experience and provide an unrivalled service.

With the aspiration to be a Bank of Choice for MSMEs in the Kingdom, Al Rajhi will continue to build and implement strategic initiatives to realise this ambition, reorienting and fast adapting to suit an ever-changing operating environment.

Partnerships and agreements to support MSMEs

• The Bank established a new service level agreement (SLA) with ‘Kafalah’ – the SME loan guarantee programme launched by the Ministry of Finance which facilitates bank lending to SMEs – to reduce the turnaround time to five working days maximum from an average three-week long approval cycle. The results from Al Rajhi’s Kafalah coverage have been immensely favourable to SME customers, with one such client success story of business recovery and sustained growth receiving wide spread media coverage and recognition during the year under review.
• With a majority of customers in the SME segment representing industries such as hospitality, entertainment and technology – the same verticals identified for development in Vision 2030 to reduce its dependency on the oil sector, the Bank continued to approach Government-established funds such as the Saudi Industrial Development Fund (SIDF), Tourism Development Fund (TDF) and the Agricultural Development Fund (ADF), to build partnerships and facilitate more financing options for SME clients.
• Al Rajhi Bank formalised an agreement with e-Commerce platform Jaddeer during the year under review, connecting its SME customers to both the public and private sector to benefit from direct purchasing opportunities.

Digital services

The SME Segment continued to implement upgrades and new features across digital channels to serve clients more efficiently. The Basic Information Report (BIR) was upgraded and made available through the Bank’s online portal, enabling clients instant access to information at their convenience, resulting in improved turnaround time and enhanced customer experience.

All MSB products are scheduled to be digitised across a number of phases, with Point of Sale (POS) Finance going live in 2021 under Phase I of the MSB digital agenda, followed by a number of other products including the MSB Credit Card. E-Commerce Finance was introduced to the MSB segment, specifically targeting those utilising the online portal for sales, with more new products such as POS Finance – Real Estate and POS Finance – Non Funded expected to go live in the immediate-term.

Participation in seminars and conferences

Al Rajhi Bank facilitated four MSME awareness sessions during May, June and August in 2021 in collaboration with the Saudi Banks Media and Awareness Committee, providing MSME customers with practical insights and financial guidance to overcome business challenges. The Bank also partnered with Monsha’at initiatives to host a few more awareness sessions for MSME customers during the year under review.

Initiatives	Partner
Launching dedicated MSB toll free number to serving this segment.	ARB Social Media
Participation in the 3rd Virtual Event for Franchise Financing (February 2022)	Monshaat
Participation in the campaign for Financing products and services provided to entrepreneurs and MSMEs	Monshaat – Ministry of Communications and Information Technology [MCIT]
Participation in different virtual sessions/seminars/workshops related to Financing product and services offered to support MSMEs	Monshaat – Chambers of Commerce
Participation in the financing awareness program through ARB social Media for MSMEs by posted Several visuals during 2021 under Monshaat awareness agreement	Monshaat
Signing “Jadeer” agreement with Monshaat to facilitate and support MSMEs by accessing the available opportunities at the bank through an electronic portal.	Monshaat

SME financing breakdown

	Micro and Small		Medium		Total
	2021	2020	2021	2020	2021	2020
Loans to MSMEs – on balance sheet (SAR ‘000)	6,688,591	1,539,692	9,173,011	8,343,305	15,861,602	9,882,997
On balance sheet loans to MSMEs as a % of total on balance sheet loans	1.5	0.5	2.0	2.8	3.5	3.3

The Bank’s SME segment witnessed an outstanding year-on-year financing growth of 61% driven by the strategic focus of the bank to be the bank of choice for this segment.