Saudi Banks Cross $800 Billion In Corporate Lending

Over the past year, corporate loans expanded by 18.5%, overtaking the retail lending growth which capped at 10.5% in Saudi Arabia.

Saudi bank loans surpass $801.6 billion (SR3 trillion) for the first time since January of this year, marking a 14.66% year-on-year (YoY) increase. According to the Saudi Central Bank (SAMA), this is the fastest recorded growth since October 2022 and has been attributed to the increase in business financing.

Over the past year, corporate loans expanded by 18.5%, overtaking the retail lending growth which capped at 10.5%. Therefore, corporate loans now make up 54.09% of total bank lending. This is a 2% increase from the previous year, with corporate lending accounting for 52.34% of total bank credit.

Real estate dominates the major portion of corporate loans, with a 21.13% share of total business lending in January. Real estate borrowings increased 30.57% YoY which amounted to SR343.6 billion. This increase in real estate financing reflects the sector’s growing demand in the Saudi Arabian economy.

According to data from the General Authority for Statistics, in the first nine months of 2024, real GDP from the real estate sector clocked in at SR176.18 billion and accounted for 7% of gross value added. Compared to the same period last year, the new figure marks an increase from SR172 billion, highlighting the increased contribution of the real estate sector to the Kingdom’s economy.

With the highest percentage of borrowing, real estate is the top driver of credit expansion in the Kingdom. This has been possible due to population growth, rapid urbanisation, large-scale developments like NEOM, ROSHN, and Diriyah Gate as well as government-backed schemes like the Sakani housing program.

The sector is in full momentum, and real estate developers and investors alike want to capitalise on it just when the demand for housing and commercial properties is soaring.

With 12.54% of total corporate loans, the wholesale and retail sector recorded SR204 billion in credit facilities. This was closely followed by manufacturing, which comprised 11.7%, with loans jumping to SR190.2 billion. 

Arab News reports that increased customer spending, a growing middle class and the rise of e-commerce business have pushed the growth in wholesale and retail trade. The sector has benefitted from investment in logistics, supply chains, and retail infrastructure. 

Saudi Arabia is also looking to expand its non-oil sector, and as a result, the government is providing a much-needed boost to the domestic manufacturing sector. This expansion has led to reduced dependency on imports, which has in turn strengthened the industrial sectors like pharmaceuticals, automotive production, and food processing. The government is also providing incentives and subsidies to increase domestic production.

One remarkable trend reported was that despite holding only 0.52% of the corporate lending share, professional, scientific, and technical activities churned in the highest annual growth rate, expanding by 34.2% to SR8.38 billion. These sectors witnessed an expansion due to infrastructure development and digital transformation. There is also an increasing demand for engineering, consultancy, and IT services.

With private sector investment in educational institutions and vocational training centres increasing, educational loans made up 33.17% of the credit, increasing to SR8.43 billion. This is part of the government’s goals to develop human capital and ensure the Kingdom’s workforce is aligned with the evolving demands of the market.

Saudi Arabia has witnessed an increase in fintech startups, digital banking, capital market activity, and financial and insurance activities, due to which financing for financial and insurance activities increased by 32.06% to SR137.62 billion. The Kingdom wants to become a regional financial hub, and is therefore pushing investment funds, initial public offerings, and sukuk issuances, which have created varied financial opportunities.

Saudi Arabia is working towards transforming itself from a primarily oil-producing country to the epicentre of development through economic diversification. With its Vision 2030, Riyadh is leaving no stone unturned to ensure development across all industries and sectors.