Kafalah’s loan portfolio stands at SAR 64 bln with over SAR 42 bln guarantees, says official

Small and Medium Enterprises Loan Guarantee Program’s (Kafalah) Director-General Homam Hashem

He explained that Kafalah guarantees at least 12.4% of this portfolio by focusing on micro, small and medium-sized enterprises (SMEs), indicating that small enterprises reached 22% of the total while medium and micro enterprises at 9% each.

The program has approximately 12 products to support its facilities, the most important of which is the high Saudization program, supply chains, technology, among others.

Portfolio indicators were promising, very positive and not repulsive, Hashem said, noting that Kafalah saw no indications of high risks.

Meanwhile, Kafalah assists funding authorities in limiting repayment defaults, if any, through rescheduling the loans without adding any margin.

Hashem added that SAMA took on the development of several programs and its work overlaps with Kafalah’s in terms of subsidized financing products, which are characterized by exempting facilities from paying financing entities and program fees as well as the first six months of installments, reducing profit margins to 4%, providing in-kind guarantees to the financing authorities and raising the guarantee ratio to 95%.

He added that the program runs until the first quarter of 2023.

However, some of the benefits offered by Kafalah had been scrapped at the expense of market needs, in addition to the expiry of the deferred loan payment program, which was extended for 18 months, the director-general noted.

He also indicated that higher interest rates will challenge the high margin of financing for SMEs, noting that Kafalah in this case will work on supporting enterprises and reducing margins.

The program backs SMEs with funding through the Small and Medium Enterprises General Authority’s (Monsha'at) portal, with a fixed risk margin to provide the best financing margin for the facility.

He also pointed out that maintaining a good credit score and contributing a portion of the financing capital will stimulate the reduction of profit margins. That is in addition to the fact that the lending sector is among those targeted by the Kingdom’s Vision 2030, contributing to job creation.