MSME business

In 2022, the Saudi Kingdom’s Small and Medium Enterprises (SME) sector jumped 9.3% to nearly a million registered businesses by the end of Q3. Data published by Monsha’at

The General Authority for Micro, Small and Medium Enterprises of the Kingdom showed that funding for SMEs from venture capitalists for the same period stood at SAR 3.1 Bn., a 93% increase YoY.

Against this backdrop of a healthy, entrepreneurial ecosystem budding across the Kingdom, Al Rajhi Bank continued to provide tailored products and financing solutions through its dedicated SME Business Unit, with a long-term vision to help increase SME contribution to the Kingdom’s GDP in their role as agents of economic growth in line with Vision 2030. The Bank also serviced micro businesses through its dedicated Micro and Small Business unit (MSB), offering further customised solutions and financing to support the growing entrepreneurial culture in the Kingdom.

Al Rajhi’s overall MSME Portfolio – inclusive of Medium-sized enterprises – grew 61% during the year under review, from SAR 15.8 Bn. in 2021 to
SAR 25.5 Bn. in 2022.

Qualitative disclosure of micro, small and medium enterprise for financial services

The approved definition of micro, small and medium enterprises and initiatives adopted by the Bank follows the classifications published by Monsha’at:

  • 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 Bank services businesses classified “Micro” through structured lending programs offered by its MSB unit under Retail Banking, and collectively services businesses classified “Small” and “Medium” through its SME unit under Corporate Banking with different policies for lending due to its potentially larger financing requirements.

The Bank routinely monitors the progress and growth of MSB clients, to better service them in terms of products, and cross sell relevant financing solutions as businesses show the potential to transition through its categorisation as they scale.

Strategic initiatives taken to support the MSME segment

With the aspiration to be a Bank of Choice for MSMEs in the Kingdom in line with the Bank of the Future (BOTF) Strategy, Al Rajhi Bank continued to build and implement strategic initiatives to support the growth of MSMEs in an ever-changing operating environment:

  • Utilising all available channels including direct sales, corporate sellers and branches to onboard MSME customers and increase market share.
  • Introducing e-commerce financing as a new product to the MSME segment.
  • Introduction of financing option for POS Finance, E-Commerce, and Business Instalment Finance through the digital channels.
  • Taking measures during the reporting period to ease the approval process, primarily for the MSB segment.
  • Enhancing the acquisition and service delivery model to improve customer acquisition, supported by digitalised and automated processes that supports better turnaround time and faster/instant approvals.
  • 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 improve recovery activities.
  • Maintaining a dedicated call centre for MSB customers, and allocating two dedicated toll-free numbers for MSB as well as SME customers for customer queries and servicing, thereby providing an unrivalled customer experience.
  • Implementing more efficient account planning techniques and improving the Bank’s MSME portfolio management process, to better understand and serve clients.

Partnerships and agreements to support MSMEs

The Bank entered into a number of partnerships and agreements with semi-government as well as private sector entities during the year under review, to identify new funding sources and opportunities for the sector. The Bank entered into agreements with the Real Estate Development Fund and the Tourism Development Fund, to facilitate growth across both verticals through SME financing.

MSME Financing Breakdown

Micro and Small Medium Total
2022 2021 2022 2021 2022 2021
Loans to MSMEs –
on balance sheet (SAR ‘000) 12,863,559 6,688,591 12,644,010 9,173,011 25,507,568 15,861,602
on balance sheet loans to MSMEs as a % of total on balance sheet loans 2.3 1.5 2.2 2.0 4.5 3.5

Future outlook

With the MSME sector expected to further grow in 2023, Al Rajhi Bank will continue to bridge the financing gap across the sector by introducing new and innovative products to better meet market needs, backed by highly competitive pricing. Both SME and MSB business units will also continue to evolve and digitalise its core systems as well as its product journeys and processes in line with the BOTF Strategy.

Partnerships will continue to be developed with semi-government entities as well as the private sector to grow financing sources and opportunities for the MSME Sector.