Kafalah Program Financing Announced, Supporting Saudi SMEs

Saudi Arabia’s Small and Medium Enterprises Loan Guarantee Program, Kafalah, has facilitated over SR100 billion (US$26.66 billion) in financing guarantees, it was announced at an event in Riyadh.

Through working with a range of financial institutions including Saudi Central Bank, National Development Fund, and the General Authority for Small and Medium Enterprises, the initiative has helped create around 1 million jobs, supported more than 23,000 SMEs, and formed 100 partnerships with public and private entities since Kafalah was launched in 2006.

The figures were revealed at event, organized by the Kafalah program, that recognized the contributions of financial institutions in supporting SMEs, a crucial sector for economic development under Saudi Vision 2030.

In an interview with Arab News, Humam Hashem, CEO of Kafalah, highlighted the program’s alignment with Vision 2030, focusing on sectors such as tourism, manufacturing, and entertainment.

“Simultaneously, when we help them, we give them higher exposure. For example, the standard is that we take 80 percent of the risk. This is the ceiling for the regular Kafalah. However, if we are targeting specific sectors, we increase our exposure from 80 to 90 or 95 percent,” he said.

Hashem added: “We also reduce our fees and help SMEs by giving them better ways to go for better business.”

The CEO noted that the Kafalah program aims to provide SR22 billion (US$5.86 billion) in funding by the end of the year and is on track to meet this target. “Next year, we are aiming for at least a 20 percent increase from the current year to go to the market,” he said.

Kafalah is also examining its environmental, social, and governance impact to support Saudi Arabia’s green initiatives.

“It’s one of our focal points. We are looking to improve our impacts and give the green Kafalah,” Hashem explained, adding that they are also examining the 17 pillars of ESG to determine which could align with the program.

Additionally, Hashem noted that Kafalah is working to improve efficiency in the industrial and manufacturing sectors, with the goal of increasing their exposure in these areas.

During his opening speech at the event, Abdul Rahman bin Mansour, chairman of the program, emphasized the importance of the Kafalah Award for Outstanding Performance in fostering collaboration with the SME sector.

He stated that this initiative broadens financing access to underserved businesses, significantly contributing to the local economy’s growth and diversification.

The event was presided over by Youssef Al-Benyan, minister of education and chairman of the SME Bank, who honored success partners from both public and private sectors.

Recognized government entities included the Saudi Central Bank, National Development Fund, and the General Authority for Small and Medium Enterprises.

Other recognized entities included the Tourism Development Fund, SME Bank, and Cultural Development Fund, as well as the General Authority for Entertainment, Awqaf, and the National Information Technology Program.

Private sector awardees comprised Riyad Bank, Arab National Bank, National Commercial Bank, and Bank Albilad, along with companies such as Abdul Latif Jameel, Al-Amthal, and Al-Raeda Finance.

To date, the Kafalah program has provided 64,494 guarantees totaling SR72.5 billion (US$19.33 billion), with the remaining funds coming from partnering institutions. As a result, 27 medium-sized enterprises funded by the program transitioned to the parallel market.

Additionally, 8 percent of micro-enterprises expanded into small and medium-sized businesses, while 4 percent of small businesses grew into medium-sized enterprises.

From 2019 to 2023, Kafalah saw a 166 percent increase in guarantees issued, accompanied by a reduction in processing time from 48 working days to just 36 hours, thanks to artificial intelligence-driven systems.

The program has also supported 18 initiatives linked to Saudi Vision 2030. A study with King Fahd University of Petroleum and Minerals found that companies supported by Kafalah created 17.3 percent more jobs compared to similar businesses receiving conventional financing.

Furthermore, the program has contributed an estimated SR27 billion (US$7.2 billion) to Saudi Arabia’s gross domestic product over the past five years.