Both gross lending and outstanding balances are maintaining positive growth in consumer lending in Saudi Arabia in 2022, as the Kingdom seems to have mostly recovered from the after-effects of the COVID-19 pandemic. Owing to consumer behaviour and spending directly affected by the pandemic and increment of VAT to 15%, consumer lending increased notably in 2021 and maintained a positive trend, amid price hikes and local and global inflation, well into 2022.
There are a number of factors driving the continued growth of retail lending in Saudi Arabia in 2022, especially in the wake of the pandemic, with people losing jobs and the general financial crunch resulting from weaker spending confidence in the light of rising prices of day-to-day commodities and inflation. Banks, on the other hand, have been expediting and assisting in simplifying the processes of loans, resulting in the growth of retail lending.
Some important changes have been made by the Saudi Central Bank (previously known as Saudi Arabian Monetary Authority (SAMA)) with regards to lenders verifying customer documents, to speed up banking and nip fraud in the bud. These new guidelines from the Saudi Central Bank will alter how banks electronically share documents and has been implemented from 1st April 2022.
Real estate lending to retail customers of Saudi commercial banks has jumped high from the very first quarter of 2022. Moving forward, the share of total real estate loans provided by the Saudi banks to their retail and corporate customers, as a percentage of total bank credit, is expanding on a quarterly basis.
The Saudi National Bank (SNB) has been honoured with the best financing entity award for residential units under construction. The award identifies the bank’s revolutionary role in financing the housing sector and its eminent financing solutions intended at assisting citizens to own suitable housing.
The ever-increasing growth of fintech and Buy Now Pay Later (BNPL) platforms, as supported by the government, along with a focus on incorporating the Shariah-compliant consumer lending strategies, will open up an ocean of new concepts, hence appealing to a broader consumer base to sustain profitable inclusion. In this regard, the Saudi Central Bank has launched licenses for consumer microfinance operations.
Saudi banks are closing more branches Kingdom-wide, even as they release new loans to consumers. The main reason for the closure of brick-and-mortar branches is the increase in online and digital banking.
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Consumer Lending
Aggregate of Consumer Credit and Mortgages/Housing. Gross Lending: The total value of loans advanced by institutions in a given year; data refers to single year only. Outstanding Balance: The collective amount owed by borrowers at the end of a given year; data refers to the cumulative impact of debt.
See All of Our DefinitionsThis report originates from Passport, our Consumer Lending research and analysis database.
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