SAMA cancels debt collection license and amends microfinance regulations

In a move aimed at facilitating business operations and developing the financial sector in the Kingdom, informed sources told Okaz that the Saudi Central Bank (SAMA) has issued an important circular addressed to all banks, financial institutions, and finance companies operating in the Kingdom, as well as licensed debt collection agencies. The directive eliminates the requirement to obtain a special license from the Central Bank to engage in debt collection activities for finance entities, relying instead on other regulatory requirements.

A regulatory framework that aligns with Vision 2030

This decision comes as part of the Saudi Central Bank's ongoing efforts to develop the regulatory environment for the financial sector, in line with the objectives of Vision 2030 and the Financial Sector Development Program. These amendments aim to reduce administrative and bureaucratic burdens on financial institutions, thereby enhancing market flexibility and operational efficiency. The bank emphasized in its circular the necessity for institutions that have already obtained a license or preliminary approval to adhere to the relevant regulations, specifically updating their activities in the commercial registers to ensure legal compliance.

Fundamental changes to financing regulations

This move follows the Saudi Arabian Monetary Authority's (SAMA) approval of a package of amendments to the executive regulations of the Finance Companies Control Law, in addition to amendments to the licensing rules for activities supporting the finance sector. These updates aim to create a more attractive investment environment in the finance sector, while maintaining high levels of transparency and protecting beneficiaries.

New regulations for micro-consumer finance

In a related development, the amended executive regulations provided detailed information regarding the capital requirements for finance companies. They stipulated that the minimum paid-up capital for micro-consumer finance companies must be SAR 20 million. In a move supporting the rapidly growing financial technology (FinTech) sector in the Kingdom, the regulations reduced the capital requirement for companies operating exclusively through FinTech to just SAR 10 million.

Scope of work and funding limits

The regulations define the scope of work for consumer finance companies as providing financing for the purchase of consumer goods and services, such as furniture, household appliances, and education, with an explicit exception for vehicle financing. The regulations also stipulate that the financing must not be linked to any business or professional activities of the beneficiary. Regarding financing limits, the regulations state that the total financing granted to a single beneficiary by a microfinance company must not exceed 60,000 riyals, while this limit is reduced to 30,000 riyals for companies that provide their services through financial technology.

Licensing fees and economic impact

The regulations set the fee for issuing, renewing, or amending a micro-consumer finance license at 20,000 riyals, while the fee for fintech companies was reduced to 10,000 riyals. These amendments are expected to stimulate competition in the finance sector, provide consumers with diverse financing options, and support the growth of emerging fintech companies, thereby enhancing financial inclusion in the Kingdom.