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Kafalah Finances jump 156 percent During 2020 amounting to 12.3 billion riyals

31/01/2021


5720 companies benefited from the Small and Medium Enterprises Financing Guarantee Program (Kafalah) during the year 2020, with a financing value of 12.3 billion riyals, compared to 4.8 billion riyals during 2019, marking an increase of 156 percent.

According to information reported by the Program to “Al-Eqtisadiah" Newspaper, the value of the financing provided by the financiers cooperating with the Program amounted to about 15.4 billion Saudi Riyals, compared to 7.4 billion Saudi Riyals, during the same period in 2019, with an increase of 107 percent.

The Program management agreed to guarantee 5,720 funding requests during 2020, compared to 2,777 requests during the same period in the previous year, with an increase of 106 percent.

The Program explained that this increase in support of enterprises during the past year 2020 is due to a number of initiatives, as the "Kafalah" Program with the contribution of the National Development Fund, launched a package of initiatives worth 450 million Saudi Riyals to guarantee loans to small and medium enterprises with a total value of more than 2.2 billion Saudi Riyals, supported by a guarantee of up to 90% of the loan value. This is based on the government's continuous efforts to confront the financial and economic impacts of the Covid-19 pandemic, and as one of the urgent and supportive measures for the sustainability of the small and medium enterprises sector.

Small and Medium Enterprises General Authority (Monsha'at) supports the “Kafalah" Program to perform its economic role and maintain growth to cover the rapid market need based on the decision of the Council of Ministers to establish a program to guarantee financing for small and medium enterprises. The Monsha'at's Board of Directors shall issue the Program's administrative and financial regulations in agreement with the Ministry of Finance to ensure that it is given financial and administrative flexibility, in line with the nature of its activity.

The Program highlighted that guaranteed funds are directed to support promising cities and regions, as the guarantees issued by the Program for small and medium enterprises during the past year were distributed to include all administrative regions in the Kingdom.

The number of financing requests received by “Kafalah" Program from all regions of the Kingdom in 2020 increased to 95 percent compared to the same period in the previous year for the main regions (Riyadh, the Eastern Province, and Makkah Al Mukarramah). As for the promising regions, the percentage of financing requests increased by 124 percent for the same period.

The Program seeks to provide more financing opportunities offered by banks to meet the needs of Saudi female entrepreneurs aspiring to implement their own projects or develop the existing ones, and activate their investment role, especially in light of the wide and diversified list of activities covered by the Program's umbrella.

“Kafalah" indicated that it places the issue of increasing Saudi women's contribution to the national economy among its priorities, by increasing the number of qualified businesswomen to manage business activities through specialized training and educational programs organized by the Program.

The Program figures indicate that the number of enterprises owned by women entrepreneurs during the Covid-19 pandemic for the year 2020 increased by about 186 percent compared to the previous year 2019.

According to data issued by the Saudi Central Bank “SAMA", the figures show an increase in the percentage of the contribution of the “Kafalah" Program in supporting the financing provided to small and medium enterprises from 5% during the second quarter of 2018 to 9% at the end of the third quarter of 2020 out of the total financing provided to the sector totaling 176 billion riyals.

Guaranteed Financing Program can be benefited from by applying to the Financing Portal, the platform launched by the Small and Medium Enterprises General Authority (Monsha'at) and by benefiting from the preferential offers offered by financiers including banks and finance companies licensed by the Saudi Central Bank (SAMA), which are cooperating with the “Kafalah" Program.


It is also possible for all micro, small and medium enterprises to benefit from Guaranteed Financing Program for the various types of facilities currently offered on the Financing Portal.

Guaranteed Financing Program supported by the Saudi Central Bank "SAMA" includes exempting enterprises from any administrative fees and from providing any material guarantees. SAMA will also bear the guarantee fees for the benefit of "Kafalah" instead of the financiers. The Program will allow the customer to start payment six months after financing is granted, and guarantee a maximum limit for profits and fees charged by financiers, so that it does not exceed 4 percent of the value of the financing annually.

It is noteworthy that SAMA launched Guaranteed Financing Program during the past year 2020, in cooperation with "Kafalah" Program, by guaranteeing around 95 percent of the value of the financing granted in accordance with the mechanisms approved within "Kafalah" Program, with the aim of providing additional support and enhancement of the creditworthiness of micro, small and medium enterprises and overcoming the challenges of financing these enterprises, which mitigates the impact of the decrease in cash flows, facilitates them to serve their customers, pay the salaries and dues of their employees and fulfill their financial obligations.

Al Eqtisadiah Newspaper​