KPMG: Non-bank loans have boosted Saudi economic growth

KPMG, a professional consultancy firm, confirmed in its first issue of the “Future Finance” report that the performance of non-bank financial institutions in Saudi Arabia helped continue economic growth in the year in course.

And dealt with the relationship The sector of financial companies from the point of view of the investor in the marketThe value of this sector is around 14.5 billion dollars (54 billion riyals).

The financial corporations sector includes: real estate, automobiles, commercial equipment, consumer credit and others This sector plays a vital role in lending to certain segments of borrowers within the Kingdom.

Khalil Ibrahim Al-Sudais, Managing Partner of KPMG’s Riyadh office, said: “Despite the market turmoil, we have seen a clear growth movement in the first half of 2021 and we have started to sense this growth movement after the return of consumer confidence in the market in the second half of 2020 “.

He added: “We can observe this growth more in general in the mortgage sector, due to local demand for housing, the low interest rate and guarantees provided by the government on the first home that every citizen buys, and the local business sector is expected to continue to grow due to the measures derived from the laws anti-compliance. Money laundering, fintech advancement, cybersecurity, business continuity planning and digitization in the financial services industry in Saudi Arabia.

The Kingdom comprises more than 35 financial institutions and, at the end of fiscal 2020, the total capital invested in the institutions amounted to 14.2 billion riyals (or $ 3.8 billion), while the total capital invested in real estate companies amounted to about 3.9 billion riyals (or one billion riyals) As for non-real estate companies, this is 8.8 billion riyals (or 2.3 billion dollars), while Saudi Real Estate Refinancing Company (SRC), in how much affected entity refinancing in the sector, amounted to 1.5 billion riyals (or $ 403 million).

Total sector-wide assets at the end of fiscal 2020 amounted to approximately 53 billion riyals (or $ 14.2 billion), and tale amount included the assets of real estate companies of 14 billion riyals (i.e. $ 3.7 billion), and the assets of non-real estate companies of 31.5 billion riyals (i.e. $ 8.4 billion) and the assets of Saudi Real Estate Refinance Company (SRC) amounting to 7.5 billion riyals ($ 2 billion).

It also included a loan portfolio that year in around 54 billion riyals ($ 14.5 billion) on and off-balance sheet, which included a corporate real estate loan portfolio worth 23.5 billion riyals and a non-real estate corporate loan portfolio worth 30.6 billion billions of riyals.

Despite new Saudi Central Bank regulations allowing finance companies to receive deposits, commercial companies currently rely heavily on debt and securitization as the main source of funding for lending activities.

At the end of 2020, total property rights and liabilities amounted to 53 billion riyals and liabilities made up 63% of the total amount, while equity made up 27% and reserves made up 10%.

For his part, Ofis Shehab, Head of Financial Services Sector at KPMG in Saudi Arabia, said: “The industry has seen significant developments over the past two years, including strengthening governance through the enactment of new regulations mainly concerning the management of the deposit acceptance process and crowdfunding with debt, ECL provisions and other measures. Furthermore, the market has seen competition between its major entities and some of the major institutions have been in able to capture market share thanks to their ability to reach customers and their effective configuration processes.

Ofis continued: “The Saudi Central Bank has implemented a new framework for the supervision of financial companies, which is a supervisory approach based on proactive risk assessment and resolution. This approach aims to oversee the sector and increase the maturity level of financial firms. financial companies, in a similar framework to the framework applied to supervise my sectors. “banking and insurance, and to the frameworks applied by other international regulatory bodies.

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