Saudi Central Bank studies requests for consumer microfinance licenses

Arab News: The central bank is studying three new requests for consumer microfinance licenses, said Bader Al-Otaibi, director-general of supervision of finance companies at the Saudi Central Bank (SAMA).

SAMA granted the first consumer microfinance license earlier this January to “Tamam” company, and is preparing to attract more actors in this sector after canceling the installments sale system.

During an interview with Asharq News, Al-Otaibi stressed that the bank aims, through consumer microfinance licenses, to attract a new segment of investors who are medium-capitals.

He added that the bank also aims to support economic growth opportunities and enhance financial inclusion by providing more financing products, in line with SAMA’s strategy to activate electronic channels in financing products, especially as most microfinance companies use financial technology.

“One of the reasons for licensing these type of companies with fewer requirements than the regular financing companies is to address the unfair practices that may occur after canceling the installment sale system,” he said.

Al-Otaibi called on applicants from the Kingdom to obtain small consumer funding from companies licensed by SAMA to protect themselves and preserve their rights. He said that setting an amount of SR20 million ($5 million) as a minimum capital requirement for companies wishing to obtain a license was a result of internal studies conducted by the bank. He added that this amount was appropriate for these types of financing companies because of their business model, target market and market share. “It also ensures that the company wishing to obtain a license is able to meet the licensing and supervisory requirements,” he said.

Al-Otaibi said that SAMA had published on its website draft rules for this type of company in order to obtain the opinions and perceptions of market customers, but it had not received many comments concerning the amount of capital.

An amount of SR50,000 ($13,000) was set as an upper limit for financing because 90 percent of loans granted from bodies other than banks were less than SR20,000 ($5,000), and these loans were for emergency purposes, he said. Al-Otaibi said that the rules did not require the financier to have specific guarantees, and that this was up to the financier, based on the degree of risk he was facing.

For beneficiaries, the regulations include a section detailing their rights, including nine rules, the most important of which is to give them fair and transparent treatment in financing and easy access to the service.

Arab Contribution Time: 12-Jan-2021 06:29 (GMT)
Arab Last Update Time: 12-Jan-2021 06:29 (GMT)