What is the Finance Sector Development Program?
The Financial Sector Development Program is a program under the Council of Economic and Development Affairs (CEDA) to assist Vision 2030 in reaching objectives. The program aims to develop the financial sector as a diversified and effective financial services sector, to support the development of the national economy by stimulating savings, finance and investment.
The program’s three main pillars are:
- Enabling financial institutions to support private sector growth.
- Developing an advanced capital market.
- Promoting and enabling financial planning
The Finance Sector Development Program is important to the continual growth of the Kingdom and its’ economy. This program is important to the Kingdom because of its’
- Low level of comprehensive coverage of financial services
- Low savings rate
- Weak financial planning
- Limited funding sources
- The need to develop the digital/automation infrastructure
How will the FSDP enable financial institutions to support private sector growth?
Enhancing the depth and breadth of financial services and products offered
The program will promote a diverse and inclusive sector that increases innovation and serves the broader population. This will open up the market to new players, remove obstacles that obstruct growth of finance companies and allowing financing for SMEs. The program will improve access to financing, therefore, improve product offerings to fill the needs of the wider economic sectors.
Building an innovative financial infrastructure
The program will implement the Integrated Digital Payment Strategy, moving towards a cashless society through digitizing KYC and end-to-end digital processing at KSA banks. It will also develop the national online factoring platform to improve cash management for SMEs, making banking solutions available to a larger population and improving the overall experience.
Managing risks through a thriving insurance sector
The program will develop a sustainable insurance sector in the Kingdom. Requiring focus on the existing regulatory environment to further develop and improve market growth.
Enhancing capabilities of the talent force
The program will also improve the professional and technical skills of talent by training them to be high quality industry professionals with the ability to facilitate innovation within financial services. This will be done through the Financial Sector Academy, covering all sub-sectors of the financial services.
How does FSDP benefit the private sector?
The program aims to increase SME’s share of total bank loans to 5%. Therefore, through incentivizing financial institutions who finance SMEs the private sector benefits through;
- Increased financial products available
Due to the government opening financial services to non-banking institutions, there is greater opportunity and competition, therefore resulting in an increase in service offerings available to SMEs and entrepreneurs. It will mean a greater range of loans available and competition in the policies and interest rates.
- Greater financing opportunity for entrepreneurs
Entrepreneurs can expect greater ease in applying and receiving banking loans because of the government’s aim to increase entrepreneurship and innovation in the Kingdom.
- Greater growth and scale opportunities
Limited access to banking services and bankability issues will be addressed and fixed to allow SMEs access to better financing options and services. Access to bank loans increases SMEs abilities to grow and scale. Therefore, improving their product offerings, services and creating jobs that also benefit the economy.
- Better financial services for SMEs
SMEs can expect improved financial services, working towards alignment with international standards. Increasing the number of competitors in the financial sector and encouraging new and innovative fintech companies to open in the Kingdom means a greater variety of higher quality services in the Kingdom.
- More accessibility of financial services
As the Saudi government encourage more fintechs to enter the market, the financial environment in the Kingdom is moving online and services that were previously face-to-face are being made available online and on mobile.
The FSDP supports the growth of the Kingdom towards diversifying their income away from oil and achieving the three pillars of the Vision 2030. Through releasing state-owned assets to the private sector and enabling financial institutions to support the private sector, the Kingdom can develop into a financially innovative country with the capability of tremendous growth and a thriving private sector.