The Saudi Central Bank (SAMA) has issued the new executive regulations for the Finance Companies Control Law, which includes precise requirements for regulating the operations of micro-consumer finance companies. This step comes as part of the Central Bank's efforts to regulate this vital sector and ensure its financial soundness. The regulations stipulate that finance companies must obtain a "no objection" letter from the Central Bank before launching any new financing products or making amendments to existing products aimed at individuals. SAMA also reserves the right to suspend any product if considerations of sector safety so require.
Capital requirements and financing ceiling
The new regulations revealed specific financial criteria for licensing companies, setting the minimum paid-up capital for micro-consumer finance companies at SAR 20 million. In a move supporting digital transformation, the regulations eased this requirement for companies operating exclusively through financial technology (Fintech), reducing the minimum capital requirement to just SAR 10 million.
Regarding the financing limits granted to beneficiaries, the regulations set a maximum ceiling of 60,000 riyals for the total financing amount from traditional microfinance companies, while setting the ceiling for companies operating through financial technology at 30,000 riyals. This financing is limited to specific consumer purposes such as purchasing furniture, household goods, and education, with an explicit exception for financing the purchase of vehicles or commercial and professional purposes.
Economic context and the goals of Vision 2030
These regulatory moves by the Saudi Central Bank are aligned with the objectives of Vision 2030 and the Financial Sector Development Program, which aim to diversify income sources and enhance financial inclusion. Regulating the microfinance sector is a crucial step in keeping pace with the global boom in financial technology services, providing individuals with flexible financing options that contribute to improving their quality of life, while ensuring a regulatory environment that protects the financial system from potential risks.
Consumer Protection and Oversight
The regulations also emphasized oversight, requiring finance companies to obtain prior approval before listing their shares on the stock market. They also set fees for issuing or renewing licenses at 20,000 riyals for traditional companies and 10,000 riyals for fintech companies. These stringent measures aim to protect consumers from being burdened with unsustainable debt and to ensure that companies operating in the market are financially sound and capable of meeting their obligations, thereby boosting confidence in the national economy and attracting further investment to the non-banking finance sector.
