SME Financing in Saudi Arabia Surges

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In the fourth quarter of 2023, financing for small and medium enterprises (SMEs) in Saudi Arabia saw a substantial increase of 20.4% year-on-year, reaching a total of $73.5 billion, according to official data. This surge highlights the Kingdom’s ongoing efforts to boost its SME sector as part of its broader economic diversification strategy.

The Kingdom’s Small and Medium Enterprises General Authority, known as Monsha’at, reported that credit facilities extended to micro and SMEs during the last three months of 2023 amounted to $6.7 billion and $24.6 billion, respectively. Medium enterprises, on the other hand, secured financing worth $42.2 billion in the same period.

Monsha’at revealed that banks in Saudi Arabia provided credit facilities totaling $68.9 billion in Q4 2023, marking a 21.1% increase compared to the previous year. Additionally, finance companies in the Kingdom granted loans amounting to $4.6 billion, reflecting a year-on-year rise of 9.3%.

The SME sector’s development is a critical component of Saudi Arabia’s Vision 2030 initiative, which aims to reduce the country’s dependence on oil by diversifying its economy. Monsha’at’s latest report showed that 9,644 SMEs benefited from the support centres in the first quarter of 2024.

Furthermore, three SMEs launched their initial public offerings on the parallel market Nomu through the Tomoh programme in early 2024. Monsha’at also highlighted Saudi Arabia’s leadership in venture capital (VC) funding within the Middle East and North Africa (MENA) region, with $240 million invested across 35 deals in the first quarter of 2024. This figure represents a significant 65% of all VC funding in the MENA region.

The report noted that a significant portion of this funding, 54%, was attributed to the $130 million pre-IPO secured by Salla in March. Despite this impressive total, there was a noticeable quarterly drop of 70% from Q4 2023 and a 42% year-on-year decrease, mirroring broader trends across the MENA landscape.

Philip Bahoshy, founder and CEO of venture capital data platform MAGNiTT, commented on these findings: “While overall funding has diminished, the Kingdom’s entrepreneurial ecosystem continues to attract investors.”

As Saudi Arabia continues to implement its Vision 2030 goals, the significant increase in SME financing and robust VC activity shows the country’s commitment to fostering a diverse and resilient economy.