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Jeddah - Yasmine El Tohamy - RIYADH: Saudi banks extended loans totaling SR2.62 trillion ($700 billion) in January, marking an 11 percent rise from the same month in 2023, according to official data.

Figures released by the Kingdom’s central bank showed an increase in personal loans accounted for 33 percent of this growth, while the remaining 67 percent was attributed to the expansion of corporate lending, particularly for real estate activities, as well as electricity, gas, and water supplies.

The surge in real estate loans within corporate activities can be credited to Saudi Arabia’s expansive giga-projects, which have mitigated the impact of rising borrowing rates associated with high interest rates.

Personal loans, which include all types of credit provided to individuals, amounted to SR1.25 trillion in January, showing an annual rise of 7 percent.

The personal loan market in Saudi Arabia has been on a significant growth trajectory, as reported by market research company SPER. This expansion is propelled by various key factors, including the demand for residential properties from expatriates entering the Kingdom, as well as government initiatives focused on modernizing the financial system.

The rapid advancement of digitization, resulting in swift lending and approval processes, is also a significant contributor to the market’s growth. Furthermore, the growing number of new entrants in the personal finance sector in Saudi Arabia is poised to create lucrative opportunities for further expansion in the near future.

Advisory and consulting firm Ken Research highlighted that the rising number of working women in Saudi Arabia is on a steady incline, a trend that is forecasted to propel growth in the market and yield positive outcomes for the Saudi personal finance market.

Additionally, the report underscored that while banks currently hold a dominant position on the supply side of the Saudi personal finance ecosystem, emerging non-banking companies and fintech firms are set to introduce robust competition into the market.

In January, lending for real estate constituted the highest share of corporate activities at 19 percent, totaling SR263 billion. This was followed closely by wholesale and retail trade at 13.37 percent, amounting to SR183.5 billion, with manufacturing activities making up 12.6 percent of corporate lending, totaling SR172.87 billion.

According to media publishing company MEED, the rising interest rates in the Kingdom have been counterbalanced by a significant surge in construction activity across Saudi Arabia’s five official giga-projects and other major initiatives supported by the Public Investment Fund.

Additionally, developments in the Kingdom indicate a swift evolution into Saudi Arabia becoming  a global hub for manufacturing and production, driven by the ambitious goals of Vision 2030.

With over 11,000 factories and industrial exports totaling SR106 billion as of the second quarter of 2023, the Kingdom aims to significantly boost its industrial gross domestic product to SR895 billion by 2030.

This will, in turn, double the job opportunities available in the sector to 2.1 million, alongside a target of industrial exports hitting SR557 billion.

Riyadh stands at the forefront of this transformation, and boasts the largest manufacturing sector in the Middle East with ongoing investments surpassing $1 trillion, according to the website for the upcoming Saudi Smart Manufacturing exhibition, set to be held in the Kingdom’s capital in May.

The website says this substantial growth is fueled by the strategic objectives of Vision 2030, with Riyadh emerging as the nucleus for advancements in smart manufacturing and technology. 

The city’s momentum is further augmented by a considerable $26 billion government investment directed towards the rapid expansion of the manufacturing sector.

According to Saudi Central Bank data, loans to professional, scientific, and technical activities surged by 56 percent, reaching SR6.25 billion, showcasing the highest growth rate among sectors.

Education loans closely followed with an annual growth rate of 38 percent, totaling SR6.33 billion. The information and communication sector also experienced significant growth, with loans increasing by 34 percent to reach SR27.6 billion.

This reflects the Kingdom’s growing emphasis on the education and scientific sectors, as evidenced by Saudi Arabia’s introduction of a new visa program designed to attract students and academics, with the aim of enhancing research.

This new permit was announced during the Human Capability Initiative, held in Riyadh in February, and is part of the Kingdom’s efforts to align the education system with global standards.