Financial Sector

Development Program
Program Charter 2022
2 Financial Sector Development Program
3 Financial Sector Development Program

Table of Contents

List of Key Abbreviations 4

Chapter 1: Financial Sector Development Program Scope 6
A) Financial Sector Development Program Description 8
B) Vision 2030 Objectives Directly Related to the Financial Sector 8
Development Program
C) Vision 2030 Objectives Indirectly Related to the Financial Sector 9
Development Program

Chapter 2: Financial Sector Development Program 10

Aspirations
A) 2030 Aspirations 12
B) 2025 Commitments 13
C) Financial Sector Development Program Metrics and Targets 14
Chapter 3: Current Status 16
A) Major Challenges 18
B) Current Efforts 26
C) Global and Local Trends in the Financial Sector 27
Chapter 4: VRP Strategy 30
A) Strategic Pillars 34
B) Strategic Considerations 38
C) Tradeoffs and Interdependencies with other VRPs 39

Chapter 5: Initiatives Portfolio 41

A) Initiatives Portfolio 42
B) Completed Initiatives 49
C) Detailing Game-Changers 53
Chapter 6: FinTech Pillar 60
A) FinTech Strategy 62
Chapter 7: Other FSDP Concentrations 76
A) Islamic Finance Strategy 79
Chapter 8: Enablers 92
A) Governance Model 93
B) Risk Mitigation and Required Actions 95
List of Key Abbreviations

AP Authorized Person
AuM Assets under Management
CAGR Compounded Annual Growth Rate
CCHI Council of Cooperative Health Insurance
CCP Central Clearing Counterparty
CEDA Council of Economic and Development Affairs
CMA Capital Market Authority
DCM Debt Capital Markets
NDMC National Debt Management Center
ECM Equity Capital Markets
ETF Exchange Traded Funds
FDI Foreign Direct Investment
FLE Financial Literacy Entity
FSDP Financial Sector Development Program
GAZT General Authority of Zakat and Tax
GCC Gulf Cooperation Council
GDP Gross Domestic Product
GOSI General Organization for Social Insurance
GWP Gross Written Premiums
IDPS Integrated Digital Payment Strategy
IPO Initial Public Offering
JCC Job Creation Commission
KYC Know Your Customer
LDR Loan Deposit Ratio
MEP Ministry of Economy and Planning
MSME Micro, Small and Medium Enterprises
MOCI Ministry of Commerce and Industry
MoH Ministry of Housing
MoI Ministry of Interior
MoJ Ministry of Justice
MoL Ministry of Labor
NDU National Digitalization Unit
NIDLP National Industrial Development and Logistics Program
NPL Non-performing Loans
NSE National Savings Entity
NTP National Transformation Program
PE Private Equity
PIF Public Investment Fund
PMO Program Management Office
PPA Public Pension Agency
PoS Point of Sale
REDF Real Estate Development Fund
SDB Saudi Development Bank
QFI Qualified Foreign Investor
ROA Return on Assets
SAGIA Saudi Arabian General Investment Authority
SAMA Saudi Central Bank
SME Small and Medium Enterprises
SPP Strategic Partnerships Program
SRC Saudi Real Estate Refinancing Company
VC Venture Capital
VRP Vision Realization Program
Chapter

1
7 Financial Sector Development Program

Chapter 1

Financial Sector Development Program

A ) Financial Sector Development Program Description

B ) Vision 2030 Objectives Directly Related to the Financial

Sector Development Program

C ) Vision 2030 Objectives Indirectly Related to the Financial

Sector Development Program
8 Financial Sector Development Program

1. Scope of Financial Sector Development Program

A) Financial Sector Development Program Description

On April 24, 2017, the Council of Economic and Development Affairs (CEDA) launched
eleven delivery programs to realize Vision 2030. The most prominent of these programs
is the Financial Sector Development Program (FSDP) that aims to develop the national
economy and the remaining VRPs.

The FSDP’s objective is to create a diversified and effective financial services sector
to support the development of the national economy, diversify its sources of income,
and stimulate savings, finance, and investment. The FSDP will achieve this ambition by
enabling financial institutions to support private sector growth, ensuring the formation
of an advanced capital market, and promoting and enabling financial planning, without
impeding the strategic objectives intended to maintain the financial services sector’s
stability.
B) Vision 2030 Objectives Directly related to the Financial Sector Development Program

The FSDP contributes directly to three strategic objectives of Vision 2030:

First Objective: Enable financial institutions to support private sector growth

Second Objective: Ensure the formation of an advanced capital market

Third Objective: Promote and enable financial planning (retirement, savings, etc.)1

Program Objectives related to Vision 2030’s Strategy

Level 1 Objectives Level 2 Objectives Level 3 Objectives

Strengthen Islamic values & national Grow contribution of the private sector
Enhance ease of doing business
1
Vibrant identify to the economy

Society
Maximize value captured from the energy Unlock state-owned assets for the Private
sector Sector
2 Enable fulfilling lives
Unlock potential of non-oil sector Privatize selected government services

3 Grow & diversify the economy Grow the Public Investment Fund’s assets Ensure the formation of an advanced
A Thriving and role as a growth engine capital market
Economy Position KSA as a global logistic hub
Create special zones & rehabilitate
4 Increase employment economic cities
Further integrate Saudi economy regionally
Attract foreign direct investment
An 5 Enhance government effectiveness
& globally

Ambitious Grow non-oil exports Promote & enable financial planning

Nation 6 Enable social responsibility
Enable citizen responsibility Support growth of nonprofit sector

Empower nonprofit organization to

Enable social contribution of businesses
create a deeper impact

Enable larger impact of non-profit sector

1) National Saving Strategy is being refreshed, the program charter will get updated once strategy refresh is completed
9 Financial Sector Development Program

The FSDP also indirectly contributes to 21 other Vision 2030 objectives

1. Increase localization of the oil and gas sector

2. Grow and capture maximum value from the mining sector
3. Develop the digital economy
4. Localize promising manufacturing industries
5. Localize military industry
6. Enable the development of the retail sector
7. Enable the development of the tourism sector
8. Increase localization of non-oil sectors
9. Unlock state-owned assets for the Private Sector
10. Privatize selected government services
11. Push forward the GCC integration agenda
12. Develop economic ties with the region beyond GCC
13. Develop economic ties with global partners
14. Develop promising local companies into regional and global leaders
15. Grow contribution of renewables to national energy mix
16. Attract foreign direct investment
17. Grow SME contribution to the economy
18. Enable suitable home ownership among Saudi families
19. Support growth of non-profit sector
20. Increase localization of Oil & Gas sector
21. Unlock new sectors through the Public Investment Fund
Chapter

2
11 Financial Sector Development Program

Chapter 2

Financial Sector Development Program

Aspirations
A ) 2030 Aspirations

B) 2025 Commitments

C) Financial Sector Development Program Metrics and Targets

12 Financial Sector Development Program

A) 2030 Aspirations

The Financial Sector Development Program’s objective is to create a thriving financial

sector that serves as a key enabler in achieving Vision 2030 objectives. By 2030, the
sector is expected to grow large enough to fund Vision 2030 objectives, offer a diverse
set of products and services through traditional and newly emerging innovations, give
previously excluded citizens access to the financial system with an inclusive structure,
achieve a high degree of digitization and maintain financial stability.

First, in terms of size, the banking sector is expected to grow to achieve total banking
assets of SAR 4.553bn in 2030 from SAR 2.631bn recorded in 2019*.

Second, the sector is expected to undergo a transformational change in terms of

diversification. The market value of the stock market as a percentage of GDP will
increase to 88% in 2030 from 66.5% recorded in 2019 (excluding the Aramco IPO). The
Program aspires to enhance innovation in the financial services sector by attracting
key players in FinTech to drive innovation and competition by increasing the number of
Fintech companies operating in the Kingdom to 525 companies by 2030.

Third, the sector is expected to make progress to achieve an inclusive structure. The
Program aims to increase the percentage of ownership of bank accounts among
adults. The Program also aims to create a shift towards financing productive financial
assets, such as lending to small and medium enterprises. Thus, increasing the share of
financing SME from banks to 20% in 2030 compared to 5.7% in 2019.

Fourth, the insurance sector is one of the most important financial services sectors that
supports all other economic activities and maintains their stability. There is a direct link
and mutual influence between the development of insurance and the development of the
economy in general. The contribution of the insurance sector to emerging economies
has a direct impact on GDP growth.The Program aspires to increase gross written
premiums as a percentage of Non-oil sector GDP to 4.3% by 2030 from 1.9% in 2019.

Fifth, the Program envisions a digital infrastructure that leads to a cashless society.
Accordingly, share of non-cash transactions will increase to 80% in 2030 from the 36%
recorded in 2019. As a result, the sector will provide a superior customer experience
and achieve higher operational efficiency.

Finally, the Program aims to maintain financial stability. This will ensure the sustainability
of the sector in general in the long term and its continued empowerment of the financial
sector. To achieve this goal, the Program is designed to comply with international
standards of financial stability, including the requirements of the Bank for International
Settlements and the International Organization of Securities Commissions.

*2019 is used as the base year

13 Financial Sector Development Program

B) 2025 Commitments

The Program has defined a set of commitments for 2025 that will form the foundation
for achieving 2030 aspirations.

First, to ensure the required growth in the financial services sector, the Program is
committed to increasing the total assets of the banking sector to SAR 3.515bn by 2025
compared to SAR 2.631bn recorded in 2019.

Second, in order to further diversify the structure of the financial services sector,
the Program is committed to increasing the market value of the stock market as a
percentage of GDP to 80.8% compared to 66.5% recorded in 2019 and the volume
of debt instruments as a percentage of GDP to 24.1% by 2025 compared to 14%
recorded in 2019. In addition, to driving innovation and competition in the financial
services sector, a number of licenses issued for FinTech companies in payments,
insurance, financing and other sectors.

Third, in order to enhance the ambitions of inclusiveness in the financial services, the
Program is committed to increasing the share of SME financing in banks to 11% by
2025 compared to 5.7% recorded in 2019.

Fourth, in order to develop a sustainable and thriving insurance sector in the Kingdom
that contributes to supporting the growth of the private sector, the Program is committed
to increasing gross written premiums as a percentage of non-oil GDP to 2.4% by 2025
compared to 1.9% recorded in 2019.

Fifth, with a view to achieving the ambitions related to digitization, specifically the
cashless society, the program is committed to increasing the share of non-cash
transactions to 70% by 2025 compared to 36% recorded in 2019.

Finally, in order to ensure overall financial stability for the financial services sector, the
program adheres to international standards related to financial stability, including the
requirements of the Bank for International Settlements and the International Organization
of Securities Commissions.

‫ )ب‬2020 ‫التزامنا في‬

14 Financial Sector Development Program

C) Financial Sector Development Program Metrics and Targets

Program Metrics

Metric type Metric name Baseline* 2020 2021 2022 2023 2024 2025

Banking sector as-

2.631 2.905 3.111 3.156 3.337 3.433 3.515
sets (SAR bn)

Credit to private sec-

1510.7 1598.6 1669.7 1750.2 1878.5 1956.4 2053.2
tor, B SAR

Total GWP to GDP

non-oil, % 1.9% 2.0% 2.1% 2.2% 2.3% 2.4% 2.4%

Number of FinTech
20 60 90 116 150 186 230
players

SME loans as % of
bank loans 5.7% 6% 7% 8% 9% 10% 11%

”Enable Financial
Institutions to Life GWP per capita,
Support Private SAR 33 40 41 42 43 44 45
Sector Growth”
metrics
Coverage ratio of
health insurance 33% 35% 37% 39% 41% 43% 45%
schemes, %
Coverage ratio of
motor insurance 39.6% 48% 54% 60% 66% 71% 77%
schemes, %
Share of non-cash
transactions, % 36% 49% 55% 60% 63% 66% 70%

Value of investments
in private equity and 9.304 9.578 9.879 10.211 10.576 10.978 11.404
venture capital (SAR
bn)

* Year 2019
15 Financial Sector Development Program

Metric type Metric name Baseline* 2020 2021 2022 2023 2024 2025

Number of listing in 6 16 20 24 24 24 26
Capital Market

Total market capital-

ization (shares) as % 66.5% 72% 75% 77% 78.1% 79.4% 80.8%
of GDP

Debt as % of GDP 14% 15.6% 17.2% 18.7% 20.1% 22.1% 24.1%

Assets under man-

agement, as % of 16.9% 22% 23.8% 25.6% 27.4% 29.4% 31%
GDP
“Ensure For-
mation of an Foreign investor own-
Advanced ership of the equity 36% 37% 38% 40% 41% 42% 44%
Capital” market cap (free float)
metrics , in %

Foreign investor own-

ership of the equity 13.3% 14% 15% 16% 16.5% 17% 17.5%
market cap, in %

Number of micro and

small cap companies
listed, as % of total 40.9% 41% 42% 43% 44% 45% 46%
number of companies
listed

Share of investment
accounts opened 82.00% =>70% =>70% =>70% =>70% =>70% =>70%
through eKYC, %

* Year 2019
Chapter

3
17 Financial Sector Development Program

Chapter 3

Current Status
A ) Major Challenges

B ) Current Efforts

C ) Global and Local Trends in the Financial Sector

18 Financial Sector Development Program

3. Current Status
Prior to designing the Program’s strategy, the current situation was studied from two
primary angles: first, major challenges facing the financial services sector; second,
on-going transformation efforts that are aligned with Program aspirations. This section
provides details on both of these aspects.

A) Major Challenges

I. High Dependence on Bank Financing

Financial Services are mainly driven by bank financing. The volume of financing granted
by the stock market and the debt instruments market was SAR123bn during 2019,
compared to the size of the existing bank financing, which amounted to SAR1.553bn
at the end of the year 20191.

% Of issuances for both stocks and debt

% Of debt and equity instruments of total
instruments out of total issuances in 2019* financing in the financial market 2019 **

100% 0.3 % 4.3% 100%

25.8 %
80% 80% 42% 40%
60% 67%
60% 85%
100 % 99.7 % 93.9 % 99.1% 100 % 96%
95.7%
40% 74.2% 40%
58% 60%
20% 20%
33 %
6.1% 15%
0% 0.9 % 0% 4%
Russia Turky Brazil Australia Malaysia Saudi Russia Turky Brazil Australia Malaysia Saudi
Arabia Arabia

Debt Equity Debt Equity

% The traded value of debt instruments (turnover rate)

400.0%
327.4%

300.0%

181.6%
200.0%
121.3%
100.0%
44.4 % 45.4 %
0.0% 0.0% 0.1% 0.5% 1.4%
0.0%
Mexico Brazil Australia Malaysia Saudi Russia Turky Indonesia South Spain
Arabia Korea

* The ratio of debt instruments issues listed in the markets (public offering) was calculated, and the ratio of stock issues to total issues (stocks and debt instruments).
** The ratio of shares (market value) and existing debt instruments to total market value was calculated in addition to the issues of existing debt instruments.
Note: Issuances of debt instruments listed in the market (public offering) and does not include the private offering traded outside the platform (OTC)
19 Financial Sector Development Program

In general, the debt instruments market in the Kingdom appears to be limited in size
and lacking liquidity.

There is a large concentration in the stock market, as the total market value of SABIC
and the banking sector is greater than 49% of the total market value of the stock
market by the end of 2019. The Program aims to address this challenge to diversify the
sector in a method similar to other comparative countries2.

% of Companies According to Their Size for Listed % Concentration of the top ten listed companies in
Companies for a Number of Countries in 2019** a number of countries for the year 2019 *

United Kingdom 40.3%

Spain 48.3% 29.2% 10.8% 11.7%

Turky 44.6%
Saudi Arabia 26.1% 34.2% 35.7% 4.0%

Malaysia 55.0%
Qatar 45.7% 32.6% 10.9% 10.9%

Saudi Arabia 60.3%

Russia 20.9% 22.2% 14.2% 42.7%

Brazil 60.4%
Malaysia 6.3% 13.2% 19.0% 61.5%

36.4% 23.8% 12.7% 27.2% United States 60.5%

Brazil

0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Qatar 84.1%

Large Enterpsie Meduim Enterprise

Dubai 86.3%
Small Enterprise Micro Enterprise

2
Charts Sources: World Federation of Exchanges (WFE)
* Excluding the influence of Aramco
** Leading companies: Market value exceeds $ 1.3 billion
Average Enterprises: Market Cap between $ 200 Million and $ 1.3 billion
Small businesses: Market value between $ 65 million and $ 200 million
Micro Enterprises: Market Value Less than $ 65 Million USD
20 Financial Sector Development Program

Compared to regional counterparts, Saudi Arabia has a relatively high net concentration
of the top ten stocks, according to market capitalization, but the number of shares of
the top ten stocks is relatively limited.

Moreover, Saudi Arabia has a relatively new asset management industry. The ratio of
assets locally managed is 16.9% to GDP in 2019. This also affects the nature of trading
activity in the stock market, as the share of institutional investment trading is low, at
41% in 20193.

Investor Ownership Comparison (Local/Foreign) Investor Trading Comparison

in Different Countries for the year 2019 ** (Individuals/Institutions) for a number of country
markets for the year 2019 *

Hong Kong 57 % 43% Hong Kong 80 % 20%

Qatar 51 % 49 % Qatar 60% 40 %
Duabi 26% 74 % Duabi 54 % 46%
Russia 51% 49 % Russia 66 % 34 %
Saudi Arabia 91% 9% Saudi Arabia 41 % 59 %

0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%

Local Investor Foreign Investor Institutional Investor Individual Investor

3
Charts Sources: Capital Market Authority, Saudi Tadawul Group
* Data for the Kingdom of Saudi Arabia as of 2019
** Data for Saudi Arabia as of 2019, with the exception of Aramco›s influence
21 Financial Sector Development Program

II. Gaps in Financial Inclusion and Productive Financing

One of the key success factors for a thriving financial sector is its ability to serve the
economy. In 2018, the percentage of adults who own a bank account in Saudi Arabia
reached 71%, while developed markets recorded an inclusion rate of more than 90%.
More specifically, the percentage of financial inclusion among adult women is 58.2%,
and the percentage of financial inclusion among men and women reached 78.8% in
remote areas in 2017.

Saudi Arabia lags behind its peers in terms of the share of account
holders in formal financial institutions

Individuals in the lowest

Rural Areas Females Total
40% of income

100% 99% 99% 99%

99% 96% 96% 97%

95% 96% 94% 96%

93% 94% 92% 95%

92% 92% 85% 93%

80% 82% 82% 88%

80% 76% 80% 85%

79% 76% 77% 79%

78% 69% 64% 71%

70% 67% 62% 70%

68% 58.8% 56% 69%

65% 54% 56% 68%

47% 51% 35% 48%

21% 33% 21% 36%

The Financial Services sector also has room for significant improvement in providing
financing to SME and increasing the penetration of mortgages through banks. By the
end of 2019, the percentage of small and micro-level enterprises financing reached
5.7% of the total financing portfolio of the banking sector. Fostering development
of certified credit bureau agencies and rating firms would improve risk assessment
capabilities in the Kingdom.

Small and medium enterprises loans as a percentage of bank loans (2019)

The estimated share of small and medium enterprises from loans in the
Kingdom is about 5.7%
81.2 %

73.5 %

50.9 % 50.9 %

36.4 % 2019
34.8 %
32.3 %
19.7 % 17.5 %
11.7 %
5.8% 5.7%
22 Financial Sector Development Program

III. Evolving Infrastructure for Digitalization

Similar to most other sectors, the financial sector is rapidly changing toward a higher
level of digitalization. While Saudi Arabia has invested heavily in various components of
technical infrastructure (e.g., payments infrastructure), significant improvement is still
possible in the use of this infrastructure toward a cashless society. In 2019, the share
of non-cash transactions stood at 36%.

% of non-cash transactions for individuals

Sweden 87%

USA 70%

Canada 67%

UK 66%

Australia 63%

China 60%

Singapore 59%

KSA 36%

Japan 27%

UAE 26%

Germany 26%

Mexico 22%

Lebanon 13%

India 4%

Egypt 2%

Results from other sources Official results released from central banks

Sources from Central Banks: Bank of Canada, RBA, Sveriges Riksbank, Federal Reserve Bank of Atlanta, Deutsche Bundesbank, SAMA
Other sources: Accenture , Euromonitor , UK Finance , UBS, INEGI, Payfort, Medici , McKinsey Report , Nippon, STATISTA
 23 Financial Sector Development Program

IV. Global Financial Technology Indicators

Tech GD
IM FCDiIgnidtaelx The Global FinTech GFIMCDInD diegxital
C-o2m0p2e1ti-tiv
Feinntescsh- 2021 Index -2021 - 2C0o2m
1 p- eFtin
titveecnhess- 2021

o/USA 1. 1.
USANew York/USA 1. San Francisco/USA 1.
1. USA
New York/USA

2. 2. Shanghai/China
Hong Kong 2. London/UK 2.
2. Hong Kong
Shanghai/China

A 3. 3. London/ UK
Sweden 3. New York/USA 3.
3. Sweden
London/ UK

SA 34. S8a0u.dRi iA
yaradbhi/aKSA 106. Riyadh/KSA 348.0S. aRuiydai dAhra
/KbS
iaA
Measure the capacity & readiness of Measure the capacity & readiness of
mprised The index analyses financial centres Calculated from score comprised The index toanalyses financial centres C
economies to adopt and explore economies adopt and explore
Quality and in terms of their FinTech offerings. from 3 metrics: Quantity, Quality and in terms of their FinTech offerings. f
digital technologies as a key driver digital technologies as a key driver
where Survey respondents were asked to Environment to investigate where Survey respondents were asked E
for economic transformation in for economic transformation in to
ning. identify the four important elements fintech innovation is happening. identify the four important elements f
business, government and wider business, government and wider
for 2 questions for 2 questions
society.
society.

2
24 Financial Sector Development Program

V. Financial Literacy
A 2017 survey by the Organization for Economic Co-operation and Development
(OECD) scored the level of financial literacy of adults in Saudi as 9.6 out of 21. This is
low compared to similar countries, and the lowest within the G20.

A number of studies conducted during 2014, 2016, and 2018 stressed the urgent need
to improve and raise the levels of financial literacy among individuals in the Kingdom,
in particular among young people between the ages of 19 and 29, who make up nearly
50% of the population. It was found that there are a number of financial behaviors that
should be developed or corrected, including low levels of financial planning, which
negatively impacts the ability to make sound financial decisions. Women on the one
hand have lower levels of financial literacy compared to their male counterparts. Women
also resort to saving through informal channels rather than formal channels, in addition
to reduced awareness and knowledge of features, benefits, and concepts related to
financial matters.

In 2019, an analytical study was conducted on the Programs and initiatives related to
financial literacy in Saudi Arabia. The aim of the study was to measure the impact of
these initiatives on the target groups, the content presented, and how to evaluate the
success of these programs in influencing and changing individual behaviors to make
better financial decisions. The study included a study of approximately 22 initiatives,
which identified that most of these initiatives were implemented through awareness
campaigns. The measure of success was focused on the number of attendees and the
number of programs offered. However, these initiatives did not take into consideration
assessing the impact it has on individuals in terms of changes in their behavior.

With reference to countries that have high rates of financial literacy, it is evident that
there is high investment in supervision and follow-up on existing financial literacy
initiatives and activities that contribute to changing financial behaviors. The Netherlands
government for example has established “the Money Wise Platform”, which is an
independent organization.

The organization aims to lead and coordinate the implementation of the National Financial
Literacy Strategy in the Netherlands. It is implementing this strategy in partnership with
the financial institutions, education sector, government sector, private sector and other
educational institutions and non-profit entities.
25 Financial Sector Development Program

Levels of adult financial literacy according to an OECD

(2017) survey published

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VI. Challenges in the Banking sector

One of the most important challenges facing banks is the application of standards
issued by international organizations and committees, including, but not limited to
the standard IFRS9 «Financial Instruments». Banks also face a challenge in internal
system development to help facilitate the process of providing products and services to
customers, which they have to adhere to the relevant regulations and instructions such
as the instructions of the National Cybersecurity Authority. In addition, competitors
(payment companies) that also provide banking products, such as, digital card products
and transfer services. These services are provided with lower fees than the banks. They
also provide better features and advantages over conventional banking products.

‫الجهود الحالية )ب‬

26 Financial Sector Development Program

B) Current Efforts

In designing the Program, we have reviewed existing strategies and initiatives defined
by the contributing entities of the Program. Currently, there are 297 initiatives planned
or under implementation, including:

• 143 initiatives planned or under implementation defined across the 5 strategic

programs of SAMA:

• Banking vision

• Insurance vision

• Financing vision

• Integrated payments strategy

• National savings strategy

• 108 initiatives planned or under implementation defined by the CMA strategy,

• 22 initiatives planned or under implementation defined by the Ministry of Finance’s

Strategic Plan,

• 17 initiatives planned or under implementation under the SME financing strategy

defined by the SME authority (Monshaat)

• 7 initiatives planned or under implementation defined by the Ministry of Economy

and Planning study on unlocking credit for the private sector.

We have reviewed the impact and ease of implementation of these initiatives, to define
the Program’s portfolio of initiatives.
27 Financial Sector Development Program

C) Global and Local Trends in the Financial Sector

The most prominent global and local trends affecting the securities service providers'
sector:

1. The rise of FinTech

In the past few years, the financial services sector has greatly benefited from
technological development to enable a more efficient market infrastructure and
market access. From a global perspective, the FinTech market is growing rapidly, and
governments began focusing on FinTech as a mean to diversify the economy and
contribute to economic growth. The Central Bank has introduced many regulations
and have launched a sandbox to regulate FinTech in the Kingdom.

2. The Emergence of Open Banking

A. Open Banking has quickly developed from a mere concept some years ago to being a
key driver behind the success of Payment Initiation Services. Open Banking is linked
to the European Parliament's issuance of payment services directives amended
(PSD2) in 2015, which aims to revolutionize the payments industry through Open
Banking services, and which took effect in 2018. In the same year, the issuance of
the European General Data Protection Regulation (GDPR) contributed to providing
customers the choice in sharing their personal data and requiring companies that
store or use customer data to meet several criteria and measurements to protect
customers and prevent fraud risks. It is worth noting that the main goal of the
European Union was to increase competition and innovation in the banking sector.

This was followed by the United Kingdom (UK) application for Open Banking
services, which made it one of the leading countries in the field. The UK has
issued a directive to compel large banks to share clients' data within a specified
period of time with third-party entities licensed by the Financial Conduct Authority
(FCA), which provides open banking services and follows specific standards and
specifications. Other countries have launched initiatives to adopt Open Banking
based on the models implemented in the European Union and the United Kingdom.
Some countries have adopted the compulsory approach, such as Australia and
Bahrain. While other countries have adopted the cooperative approach, based on
providing legislative authorities with guidance and standards for sharing data, and
technical specifications without requiring banks to share customer data, such as
Singapore and Hong Kong.

B. The Saudi Central Bank (SAMA) announced the issuance of the Open Banking policy,
which, if applied, will enable bank customers to manage their bank accounts, and
share data securely, and allow third-party service providers to access customers’
banking information with their consent. Customers can benefit from the best financial
products and services, have all of their accounts in one control panel, and have
access to user-friendly banking activities. SAMA has also looked at international
experiences in implementing open banking and gathered opinions of participants in
the local financial sector.
28 Financial Sector Development Program

The aim of the study was to assess the potential impact of Open Banking on the
Saudi financial sector, and to determine the most appropriate approach to apply it
in Saudi Arabia. SAMA is implementing three phases for the adoption of the Open
Banking initiatives; the design phase, the implementation phase and finally the
release phase. Through these phases, SAMA will work with participants from the
financial sector to build an Open Banking system, and reach the optimum framework
to meet the needs of stakeholders in the sector.

3. Advances in Technology
The fields of investment, trading, and financial markets have witnessed a tremendous
advance in technology in recent years. There are new and various forms of investment
and trading in the financial sector, such as the alternative investment sector that
has witnessed emerging technologies, most notably Blockchain technology. This
development is expected to continue and raise the demand for big data, advanced
analytics, and Cloud services in the upcoming years.

4. High Demand for Environmental, Social Governance and Corporate

Governance (ESG)
Sustainable investment has become a priority in the global agenda. There has
been a rise in the investments in environmental, social governance, and corporate
governance (ESG) and related risk policies. It has even become a necessity to define
and develop corporate sustainability strategies, and it is part of the agenda of global
governments.

5. Automating the insurance sector

The world is currently witnessing a remarkable development in the insurance sector
driven by financial technology. These changes provide technical and innovative
solutions to improve the experience of beneficiaries, stakeholders and legislators.
Many technical services have developed in insurance vehicles, such as, enabling
the filing of accident claims or estimating the costs of traffic accidents, and the
submission of objections, online or via applications. This is in addition to technologies
that assess the quality of the driving behavior and provides discounts for safer
driving (Telematics). The use of artificial intelligence in the sector is helping improve
insurance services for the beneficiaries.

The Central Bank of Saudi Arabia (SAMA) granted approvals for the trial operation
of several insurance brokerage firms in 2018 to keep pace with the accelerating
global trends. The rules, issued in 2020, overcome the regulatory challenges of
the development of electronic insurance business activities and facilitate the entry
of entrepreneurs under a guaranteed regulation while preserving the rights of the
beneficiaries.
Chapter

4
30 Financial Sector Development Program

Chapter 4

VRP Strategy
A ) Strategic Pillars

B ) Strategic Considerations

C ) Tradeoffs and interdependencies with other VRPs

31 Financial Sector Development Program

4. VRP Strategy
This section summarizes the Program's execution strategy and how the aspirations and
commitments will be realized. This section comprises of strategic pillars and strategic
considerations, as well as expected tradeoffs at the Program level.
Several subsectors fall under the Financial Sector Development Program, including banking,
insurance, investment, equity and debt markets. It is worth noting that the Program through its
initiatives focuses on all of these sub-sectors.
Many global and local trends were taken into consideration when designing the FSDP strategic
plan, and the effects of these trends on the global and local financial sector. Some of these
trends include the growing demand for financial products and services in compliance with
Islamic law, the technical variables for global financial securities trading and bonds, and
the increase in the number of electronic transactions and their impact on the sector and its
infrastructure. In addition, targets and initiatives have been reviewed and rescheduled based
on current and expected impacts on the financial sector from the health pandemic (Covid-19).
The strategy seeks to infrastructure for the financial sector, in particular focusing on legislation.
The Program also aims to further deepen the debt instruments market and the stock market by
providing for more diversified investment options at the government level and the private sector.
The Program strategy aims at empowering financial institutions (such as banks, insurance
companies, investment companies, etc.) to support the growth of companies and institutions
in the private sector. The Program strategy at the current stage does not focus on financing
provided by specialized governmental credit institutions, such as, the National Development
Fund, the Industrial Sector Development Fund, the Agricultural Development Fund, etc.), and
ensuring that the financial instruments provided by these institutions have no duplication with
the current strategy.
The strategy of the Program includes the sub-sectors that are supervised by local
legislative bodies, which are:
1. The Banking System and its Subsectors: The FSDP strategy includes preserving the
soundness and durability of the banking system and its sub-sectors, which includes, retail
banking, financing, and savings and savings products. The inclusion of the banking sector
in the FSDP strategy plan helps identify and evaluate various risks, measure and deal with
risks, monitor capital and the levels of liquidity and the profitability of the sector, in addition
to stress tests of the banking sector and monitoring indicators. This will ensure soundness
and the ability to withstand shocks. The inclusion will also help implement technological
advancements and adoption in the banking sector and encourage banks to use technology
to deliver banking products and services.
2 Insurance Sector and its Sub-sectors: It includes insurance companies, reinsurance
companies, support service companies (such as insurance and reinsurance brokerage
firms, and insurance agency companies).
32 Financial Sector Development Program

3. Finance Sector and its Sub-sectors: The FSDP strategy includes developing and promoting
the growth of the finance sector and providing innovative solutions and various products
that serve all groups. These products include mortgage finance, non-real estate financing
activities, financing micro-activities, re-investment real-estate finance, insurance claim
settlement, and actuarial services companies.
4. Payments and FinTech Sector: One of the main objectives of FSDP is to develop and
promote the growth of the payments sector and to encourage technological innovations to
provide reliable solutions for services and products for all business segments and improve
user experience. This includes payment systems and companies that engages in e-wallet
activities and point-of-sale and payment accumulation activities for online merchants,
invoices or financial transactions, sharing account information, or handing out payment
orders.
5. The Saudi Tadawul Group is a parent company with four subsidiaries: the Saudi Exchange,
a dedicated stock exchange business (previously known as the Saudi Stock Exchange
Company - Tadawul), the Securities Clearing Center Company (Muqassa), the Securities
Depository Center Company (Edaa), and Wamid. CMA has the authority to conduct
Tadawul’s business and set and clarify regulations related to it. CMA requires licensing for
listed companies that practice trading, depository, or clearing, providing their legal status
as joint stock companies.
6. Licensed Market Institutions: The Capital Market Authority (CMA) regulates the business of
licensed market institutions and determines the procedures and conditions to carry out their
services. CMA issues the rules and provisions of conduct that licensed market institutions
must abide by, and rules related to supervising procedures and provisions related to client's
funds and assets.
7. Companies Listed on the Financial Market: The Capital Market Authority (CMA) sets the
rules and standards that companies comply with to ensure compliance with best governance
practices that ensure shareholders and stakeholders rights are protected.
8. Dealers and Shareholders in the Financial Market: The Capital Market Authority (CMA)
seeks to raise and enhance the level of awareness of the financial market system and
its regulations and raise the level of financial and investment culture. These efforts will
contribute to increasing levels of confidence, increasing the knowledge and skill to manage
investment tools, and raising public awareness of their public and private rights, which are
guaranteed by law and regulations.
9. Special Purpose Establishments: Special purpose establishments are companies licensed
to issue debt instruments regulated by special purpose enterprises rules and regulations.
These special purpose entities act as an independent legal entity and ends its services
upon the conclusion of its purpose of establishment.
33 Financial Sector Development Program

10. Credit Rating Companies and Agencies: The Capital Market Authority (CMA) regulates
the practice of credit rating and monitoring agencies and determines the procedures and
conditions for obtaining the necessary license.
11. Investment Products (Investment Funds): The Capital Market Authority (CMA) undertakes
organizing the establishment and registration of investment funds supervising their offering,
management and operations, and associated activities.
12. FinTech: The Capital Market Authority (CMA) is providing a simplified regulatory framework
that helps support innovation in the financial technology sector in Saudi Arabia. The
regulatory framework is designed to promote and develop financial technology to enable
participants to present and test products, services, and business models related to financial
technology within a specific period of time and requirements.
13. External Auditors: There are a set of standards and requirements that must be met by
external auditors of the listed companies regulated by the Capital Market Authority (CMA).
These standards and requirements include a registration requirement, conditions, and
procedures, and continuing obligations on registered auditors auditing of listed companies
and investment funds, excluding arrangement, or advising activities.
34 Financial Sector Development Program

A. Strategic Pillars

Vision 2030 objectives require four strategic pillars to build a thriving financial services sector:

1 2 3 4
Enable financial Ensure the formation Promote and
institutions to support FinTech
of an advanced enable financial
private sector growth strategy
capital market planning

Summary of the main objectives of the strategic pillars:

Strategic Pillar Main Objectives

1. Enhancing the depth and breadth of the financial services and

products offered
Enable Financial
Institutions to Support 2. Building an innovative financial infrastructure
Private Sector Growth 3. Managing risks through a thriving insurance sector

4. Enhancing talent pool capabilities

1. Enhancing the role of the financial market in providing financing

sources for the national economy

Ensure the Formation 2. Offering an efficient platform to encourage investment and diversify
of an Advanced Capital the investor base
Market 3. Providing a safe and transparent infrastructure (maintaining
financial markets stability)

4. Enhancing market participants’ capacity and sophistication

1- Stimulate and bolster sustainable demand for savings schemes

2- Drive expansion of savings products and channels available in the

Promote and Enable market
Financial Planning1
3- Improve and strengthen the savings ecosystem

4- Enhance financial literacy

1- KSA Global FinTech Positioning

2- Regulatory framework

3- Market and Funding

FinTech Strategy
4- Talent Development

5- Enabling Technical Infrastructure

6-Local and International Collaborations

1) National Saving Strategy is being refreshed, the program charter will get updated once strategy refresh is completed
35 Financial Sector Development Program

The Program has four key objectives to facilitate financial institutions support of
private sector growth:

1. Main Objectives to Enable Financial Institutions to Support Private Sec-

tor Growth:
i. Enhancing the depth and breadth of the financial services and products offered
The Program will promote a diverse and inclusive sector that drives innovation and serves
the financing needs of a broader population. In doing so, it will open the sector to emerging
FinTech players, remove obstacles that hinder the growth of finance companies, and unlock
financing for SME. Further, the Program will improve access to financing and enhance
investment product offerings to support the development of the national economy.
ii. Building an innovative financial infrastructure
The Program will promote innovation through implementation of the Integrated Digital
Payment strategy to move to a cashless society, through digitalizing Know Your Customer
procedures (KYC), and end-to-end digital processing in the banking sector. The Program will
connect and empower service providers with financial services and payments infrastructure
in a simple, convenient, and secure way. The enhanced infrastructure will provide banking
solutions to a larger population and improve customer experience by adopting better
technical standards.
iii. Managing risks through a thriving insurance sector
The Program will develop a sustainable and a thriving insurance sector in Saudi Arabia.
It will focus on strengthening the existing regulatory environment to address challenges
in the insurance sector. These instructions will ensure further development and growth
by increasing companies' ability to take risks. They will encourage companies to provide
innovative technology solutions that contribute to facilitating the experience of beneficiaries
and stakeholders.

iv. Enhancing capabilities of the talent force

The Program will also enhance the professional and technical capabilities of existing talent
to facilitate and provide innovation in financial services. This objective will be achieved
through the Financial Sector Academy.
36 Financial Sector Development Program

II. Main Objectives of Developing an Advanced Financial Market:

i. Enhancing the role of the financial market in providing financing sources for the
national economy
The Program aims to diversify sources of funding for the government and private sector by
further growing and deepening liquidity of the equity and debt capital markets. In doing so,
the Program will encourage the planned privatization of state-owned entities through IPOs
on the Saudi Stock Exchange. This action will increase equity market capitalization and
further diversify investment options available for investors.
At the same time, the Program will seek to further deepen the debt capital markets in Saudi
Arabia to provide alternative funding away from banking and equity.
Additionally, to further diversify alternative sources of available funding, especially for
specific economic segments (e.g., start-ups, entrepreneurs, NGOs), the Program will
emphasize the growth of private equity, venture capital, financing investment funds, and
endowments.
ii. Offering an efficient platform to encourage investment and diversify the investor base
Beyond simply increasing the liquidity available on equity and debt capital markets, the
Program will further develop investment and trading strategies available to investors through
the introduction of derivatives. It is believed that this action will further attract institutional
investors, diversifying away from today’s retail-driven market.
Furthermore, the Program will seek to attract foreign investors to bring capital into the
economy, as it continues to diversify the investor base. It will do so by enhancing Qualified
Foreign Investor access and the account opening process. Concurrently, the Program will
establish co-trading linkage with selected developed markets to provide remote access to
Saudi markets, thereby attracting further foreign liquidity into the Kingdom.
Moreover, the Program aims to establish the necessary environment to grow the asset
management industry by further enhancing the capabilities of current players and attracting
new players.
iii. Providing a safe and transparent infrastructure (maintaining financial markets
stability)
While developing key initiatives, the Program will put a strong emphasis on ensuring stability,
security and transparency of its infrastructure to bolster investor / issuer confidence. In doing
so, the Program will seek to further digitize the process of opening investment accounts to
enhance the investor experience. Also, the Program will also enhance security informatics to
ensure infrastructure stability and safety. Finally, the Program will focus on a clearinghouse
peer-to-peer based, to upgrade the post-trade model and risk management model. In
addition, the Program aims to develop the regulatory framework for the supervision and
37 Financial Sector Development Program

control of infrastructure institutions (the capital market, the depository center, the clearing
center), ensuring the commitment of the infrastructure institutions to the basic principles
of the market authority and implementing the regulations, market rules procedures, and to
ensure their effectiveness.
iv. Enhancing market participants’ capacity and sophistication
Enhancing the capabilities and sophistication of market participants (e.g. investors, financial
brokers) is often cited as a key area of focus to further develop Financial Services in Saudi
Arabia. The Program will focus on enhancing local capacity, sophistication and capabilities
by establishing a financial sector academy covering all sub-sectors to upgrade local skills
and capabilities. In addition, the potential establishment of a regulatory entity to supervise
the audit offices of listed companies will be assessed to ensure compliance with the highest
standards of disclosures and transparency.

III. Main Objectives to Encourage and Enable Financial Planing (Savings

and Other Products)1
The objectives of the National Saving Strategy are to enhance the saving culture in Saudi
Arabia. The Financial Literacy Strategy was released in 2019 with the objective of improving
financial behaviors. In 2020, The National Savings Strategy was updated to address the
causes of the low levels of saving in Saudi Arabia through raising and improving financial
levels and financial behaviors. To achieve this, the National Saving Strategy and the Financial
Literacy Strategy were merged under (National Savings and Financial Literacy Strategy).
The objectives of the strategy are to help individuals make sound financial decisions,
achieve financial well-being, and access to personal financial tools. The strategy will also
develop supportive regulatory and legislative frameworks that will support the promotion of
a saving culture. It will also provide easy access to various financial products and services.
In addition it will provide the means of effective communication and coordination between
the main stakeholders. Note that the strategy is under review and pillar three will be updated
with the approved strategy.

1) National Saving Strategy is being refreshed, the program charter will get updated once strategy refresh is completed
38 Financial Sector Development Program

B. Strategic Considerations

Topic Description Decision taken

Financial stability We considered The Program carefully considered the financial

various scenarios to stability implications of the level of growth to target
achieve growth while in the banking sector. The global financial crisis and
maintaining overall past crises in developing nations show that inability
stability of the sector to balance banking growth with stability will impose
significant downside risks to the economy in the
medium to long-term. As such, the Program will comply
with international standards of stability to monitor and
maintain the health of the sector. In order not to risk the
achievement of Vision 2030 targets, the Program will
diversify the sources of funding by deepening the debt
and equity capital markets. In addition, the Program
supports the independence of the regulatory bodies in
conducting their supervisory role of the sector.
Introduction of The Program One of the main objectives of the Program is to diversify
sophisticated considered the right the asset classes available for investors in the capital
capital market time for introducing markets. However, currently retail investors heavily
products sophisticated capital contribute to market trading and institutional capabilities
markets products are yet to be built. As such, the Program decided that
(i.e., derivatives) derivatives should be introduced in a gradual manner
starting with simpler instruments and after the setup of
a relevant risk management infrastructure (i.e., central
counterparty) and the financial sector academy, which
will provide necessary training for market participants.
Meanwhile, the Program is supportive of the current
ETF program in place at Tadawul to diversify the asset
classes.

Digitization Digitization of the Digitization in the financial sector is one of the main
banking sector objectives of the Program as it will help provide
convenience to customers as well as job creation in the
sector.

Financing small Enabling the growth The Program analyzed the financing for small and
and medium enter- of specialized medium enterprises, in particular the regulations that
prises (SME) financing for SME enable specialized entities in financing SME. The Saudi
Central Bank regulates specialized financing entities
such as specialized banks in lending or financing SME.
The Program took into consideration the establishment
of a SME bank.
39 Financial Sector Development Program

C. Tradeoffs and Interdependencies with other VRPs

The financial sector development program team has defined potential tradeoffs and
interdependencies with other VRPs in order to obtain the leadership’s guidance toward
resolving them. These tradeoffs and interdependencies are detailed as follows:
Relevant
Interdependencies Strategic decisions
programs

Developing the Housing Program Alignment with the Housing Vision Realization Program
mortgage sector to focus efforts to introduce affordable mortgage
guarantees and housing construction and to provide a
refinancing market to support the development of the
mortgage sector.
SME empowerment National Various programs depend on empowering SME. By
Transformation providing access to financing, FSDP enables the
Program, Housing empowerment of the SME sector. Meanwhile, FSDP
Program, NIDLP depends on the SME Authority for improving the supply
and nurturing of creditworthy SME businesses.

Business Public FSDP will improve access to financing and diversify

environment Investment Fund funding opportunities for the private sector. Several
development Program, Housing programs will benefit from these activities.
Program, NIDLP

Capital market Public Development of an advanced capital market will enable

development Investment Fund various programs to achieve their funding and financial
Program, enablement objectives with more diversified funding
Privatization instruments.
Program, Housing
Program, NIDLP

rade-offs and Interdependencies with other VRPs

Tradeoffs Relevant Strategic decisions

program
Financial planning NTP Increased focus on savings might negatively impact
and focus on economic growth in the short-term as citizens divert away
savings from consumption. However, long-term the impact will
stabilize and will support productive growth.
Chapter

5
41 Financial Sector Development Program

Chapter 5

Initiatives Portfolio
A ) Initiatives Portfolio

B ) Completed Initiatives

C ) Detailing Game-Changers
42 Financial Sector Development Program

A. Initiatives Portfolio
The Program’s aspirations, commitments, strategic pillars and strategic considerations
have been translated into a number of initiatives to help achieve commitments made
by the Program. These initiatives also constitute a foundation on which the aspirations
of KSA Vision 2030 shall be achieved.
The current relevant program initiatives and responsibilities held by various entities
have been reviewed and linked to the strategic pillars.
Additionally, initiatives were designed according to a comprehensive review of the
Program’s requirements, and a thorough review of global best practices. The most
suitable alternative was selected to make up a portfolio of initiatives, which are detailed
below.

Pillar 1: Enable Financial Institutions to Support the Growth of the Private Sector

Strategic Pillar : Enable financial institutions to support private sector growth (3.1.5)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Open financial Enable market entry of The Saudi Increase number of li- 1) Share of non-
services to new new types of players Central Bank censed FinTech players cash transactions
types of players (e.g. FinTech) to fos- (SAMA) to minimum of 230 by 2) Number of
ter development of an 2025 FinTech players
innovative ecosystem 3) Credit to Private
in Financial Services, Sector
encourage entrepreneur- 4) Banking Sector
ship / job creation and Assets to GDP
bolster private sector
competition to drive
innovation and service
quality
Drive towards a Enhancing the use The Saudi Share of non-cash 1) Share of non-
cashless society of digital payment Central Bank transactions as % of cash transactions
solutions by creating (SAMA) total transactions: 70% 2) Number of
and developing by 2025 FinTech players
innovative payment
solutions to facilitate
financial transactions
of individuals and
institutions from various
sectors
43 Financial Sector Development Program

Strategic Pillar : Enable financial institutions to support private sector growth (3.1.5)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Strengthen com- Ensure the imposition of The Saudi 1) Increase the ratio of 1) GWPs / non-oil
pulsory health compulsory health insur- Central Bank GWPs / non-oil GDP: GDP
insurance ance to curb fraudulent (SAMA) 2.4% by 2025 2) Coverage ratio of
enforcement practices and further de- 2) Coverage ratio health insurance
velop existing insurance of health insurance schemes
sector (e.g., increased schemes, 45% by 2025
gross written premiums
(GWPs), enlarged scale,
lower cost-to-income
ratio) through tighter
supervision

Strengthen Ensure the imposition The Saudi 1) Increase the ratio of 1) GWPs / non-oil
compulsory of compulsory motor Central Bank GWPs / non-oil GDP: GDP
motor insurance insurance to curb (SAMA) 2.4% by 2025 2) Coverage ratio of
enforcement fraudulent practices 2) Coverage ratio motor insurance
and further develop of motor insurance schemes
existing insurance schemes, 77% by 2025
sector (e.g., increased
GWPs, enlarged scale,
lower cost-to-income
ratio) through tighter
supervision

Enhance existing Enhanced existing The Saudi 1) Increase the ratio of 1) Motor insurance
insurance laws insurance laws; Central Bank GWPs / non-oil GDP: coverage ratio
and regulations issuance of new laws; (SAMA) 2.4% by 2025 2) Health insurance
reconsideration of 2) Coverage ratio coverage ratio
responsibility distribution of health insurance 3) GWPs / non-oil
among regulators in a schemes, 45% by 2025 GDP
manner that ensures
amendment of the
existing insurance law.

SME Indirect Government indirect SME Bank Increase SME loans 1) Banking sector
lending lending provides the as % of bank loans to assets to GDP
ability to leverage the 11% by 2025 (%)
network of Non-Banking 2) Credit to Private
Financial Institutions Sector
to extend loans to 3) SME loans as %
targeted SME, through of bank loans
low-cost financing and
refinancing. This will
improve the availability
of funding sources
for SME, in turn,
assisting in improving
their operations and
investment

Increase the The Kafalah Program SME Bank Increase SME loans 1) Credit to Private
capital and is being restructured to as % of bank loans to Sector
support the ensure its sustainability 11% by 2025 2) SME loans as %
transformation and continued of bank loans
of Kafalah successful support to
Program the SME sector in the
Kingdom
44 Financial Sector Development Program

Strategic Pillar : Enable financial institutions to support private sector growth (3.1.5)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Government Establishing a SME Bank Support the growth of 1) Credit to Private

Venture Capital government venture start-ups and diversify Sector
Fund for SME capital fund that focuses their sources of
on investing in Start-ups financing by increasing
and SME in early growth private sector
stages and hence investment in start-
targets gaps in current ups during their early
financing for SME not growth stages
covered by Fund of
Funds

Enable and Enable and facilitate The Saudi Increase the share of 1) Share of non-
link service linkage to the Central Bank non-cash transactions cash transactions
providers with infrastructure of financial (SAMA) to 70% of total 2) Number of
the infrastructure services and payments transactions in 2025 FinTech players
of financial for licensed financial Expand the index of
services and entities in a simple, the number of FinTech
payments appropriate and secure players to 230
manner companies in 2025

Facilitate Transform the finance The Saudi Increase the private 1) Credit to private
electronic sector into a smart Central Bank sector credit index to sector
transactions financial sector and (SAMA) SAR 2,053.2 billion in
for financing elevate and improve 2025
activities procedures for financing.
This ensures effective
and efficient use of
resources and promotes
financial inclusion

Enact Support the insurance The Saudi Increase the ratio of 1) GWPs / non-oil
compulsory sector by enacting Central Bank GWPs / non-oil GDP to GDP (%)
insurance in mandatory insurance (SAMA) 2.4 % in 2025
the commercial provisions and
Sector incorporating them in
the laws and regulations
of government entities
supervising risk-
associated activities
that require insurance
coverage

Promote Raise public awareness Saudi FinTech Increase the number 1) Number of
innovation in the on the benefits of of FinTech companies FinTech players
financial sector FinTech products and and the number of
services in reducing solutions and small
costs and accelerating technology platforms,
the pace of services as well as increase
while raising their the share of non-
standards to support the cash transactions
Kingdom’s drive towards and expand FinTech
a cashless society players index to 230
companies by 2025
45 Financial Sector Development Program

Pillar 2: Developing an Advanced Financial Market

Strategic Pillar : Ensure the formation of an advanced capital market (3.1.4)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Listing of Identify commercial MoF Increasing the inclusion 1) Total market

commercial state-owned assets and of State-owned assets capitalization
government businesses and assess with at least 4 govern- (shares) as % of
assets and their ability to be listed in ment assets, which will GDP
companies in the financial markets, by contribute to: 2) Percentage of
the financial providing the required 1. Increase in the mar- institutional
market support through the ket value of equities as investor’s share of
committee a proportion of GDP value traded
2. Increase in the share 3) Percentage of
of institutional inves- foreign investor
tors in trading value ownership of the
3.Increase in foreign equity market cap
investor ownership (free float)
Deepen debt Encourage growth of CMA Diversification of 1) Debt as % of
capital markets existing debt capital financing options GDP
markets to further for both the private
diversify funding options and public sectors,
for public / private creation of a new asset
sector and create new class for investors,
asset class for investors diversification of
lending and improving
financial stability

Enable growth Increasing amount CMA Increase size of 1) Assets under

and expansion of investment funds investment funds Management, as
of Financing available, adding more % of GDP
Investment funding streams to the
Funds economy

Collaborate with Allocating part of CMA 1) Increase Assets 1) Assets under

government government-managed under Management as Management, as
funds to assets to be managed % of GDP % of GDP
support asset by local authorized 2) Improved
management persons capabilities of financial
and custody intermediaries
activities of
domestic APs
46 Financial Sector Development Program

Strategic Pillar : Ensure the formation of an advanced capital market (3.1.4)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Incentivize Motivating the private Tadawul 1) Increasing the 1) Total market

private sector sector to be listed in the number of listings in capitalization
on listing in the Saudi financial market to the Saudi stock market (shares) as % of
Saudi stock increase the proportion 2) Raise market value GDP
market of GDP of the market to 3) Increase the 2) Number of
the Saudi economy number of awareness micro and small
workshops to reach cap companies
120 workshops by listed, as % of
2025 total number of
companies listed
3) Institutional
investor’s share
of the value in
circulation
4) Percentage of
foreign investor
ownership of the
equity market cap
(free float)
5) Assets under
Management, as
% of GDP

Enabling the Develop the regulatory CMA Improving the 1) Assets under
creation of framework for regulatory environment Management, as
financial market supervision and control of financial market % of GDP
infrastructure of market infrastructure infrastructure 2) Total market
institutions institutions (financial institutions capitalization
market, deposit (shares) as % of
center, clearing GDP
house) to include the
tasks, responsibilities
and methodology
used in supervising
and controlling the
infrastructure institutions
of the Saudi financial
market

Linking with Linking global deposit EDAA Intensifying domestic 1) Debt as % of

international center systems such market capacity by GDP
depository as Clearstream and increasing the base
centers for the Euroclear in line with of foreign investors
bond market global practices, to and the demand
support the debt for domestic debt
instrument market in instruments
general and government
bonds in particular
47 Financial Sector Development Program

Strategic Pillar : Ensure the formation of an advanced capital market (3.1.4)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Facilitate Develop settlement in Tadawul Improving the debt 1) Debt as % of

securities local debt markets by market environment GDP
transfers providing a mechanism to align with global
between key for the transfer of markets
traders, their securities between the
clients, and their main traders and their
subsidiaries for clients free of payment
new issues (FOP) in the primary and
secondary market

Developing Diversify Saudi stock CMA Increasing the number 1) Number of listings
regulations market investment of companies listed in capital market
to encourage options by encouraging in the Saudi market, 2) Total market
foreign foreign companies to diversifying the investor capitalization
companies list list in the Saudi stock base, and increasing (shares) as % of
shares in the market and modify the the attractiveness of GDP
Saudi stock securities offering rules the market 3) Percentage of
market continuing obligations foreign investor
and listing rules to ownership of the
reverse the approved equity market cap
regulatory concepts (free float)

Enabling mutual Regulating financial CMA Enhancing expertise 1) Assets under

recognition services, allowing and knowledge Management, as
of investment financial companies to exchange in asset % of GDP
products offer certain financial management and
and asset products across diversifying the investor
management borders, enabling them base
outside the to do business in these
Kingdom countries without the
need for further licenses
from international
regulators

Creating the Study the issuance CMA Stimulating investment 1) Number of

regulatory and trading of digital and diversification of FinTech players
framework for securities in coordination investment products
the issuance with the relevant
and trading of authorities in relation to
digital securities their supervisory role
(STO) on service providers
and participants in the
issuance and trading
of digital securities in
accordance with the
financial market system
and its executive
regulations
48 Financial Sector Development Program

Strategic Pillar : Ensure the formation of an advanced capital market (3.1.4)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Addressing the The means by which a CMA Stimulating the 1) Debt as % of

mechanism of transaction is processed issuance and trading of GDP
calculating zakat and calculated (including securities 2) Percentage of
on financial the calculation of any foreign investor
products withholding tax) has ownership of the
a great impact on equity market cap
the attractiveness of (free float)
financial products to
investors because it
affects the proportion
of profits they earn.
The products of the
debt instruments and
sukuk market are on
top of this, due to their
relatively low risk and
profit-taking nature

Develop the Develop the repo market Saudi Central Increase liquidity in 1) Debt as % of
repo market of of debt instruments to Bank (SAMA) debt markets GDP
debt Instruments contribute to monetary
stability by improving
banks' ability to manage
liquidity

ESG and To work on studying NDMC 1) Access the growing 1) Debt as % of

Sustainable the enhancement of the global demand GDP
Finance in the Kingdom's rating from for sustainable
Kingdom of ESG Rating Agencies, investments. And
Saudi Arabia and to issue sovereign deepen the investor
sustainable debt base
instruments 2) Increase
transparency of the
efforts made by the
Kingdom of Saudi
Arabia towards
compliance with
international standards
of ESG.
3) Finance eligible
expenditures
and projects in
compliance with global
sustainability standards
49 Financial Sector Development Program

Pillar 3: Encourage and Enable Financial Planning

Strategic Pillar : Promote and enable financial planning (retirement, savings, etc.) (6.1.1)

Program metrics
Leading
Initiative name Description Expected impact impacted by
entity
initiative

Establish Na- Establishing a stand- MoF 1) increase saving 1) Assets under

tional Savings alone government products in the market. Management as
Entity (gov’t backed savings scheme 2) increase in the total % of GDP
backed retail provider to stimulate amount of household
savings prod- private savings by pro- savings in the king-
ucts) viding tailored products, dom.
bolstering competition 3) Simplify access
for savings and allowing to saving products
retail customers to save through digital plat-
in government guaran- forms
teed products

B. Completed Initiatives

Leading
Initiative name Description Expected impact
entity

Create a level playing Address key challenges for finance Saudi Central Increase share of SME
field for finance compa- companies (e.g., access to funding, Bank (SAMA) financing
nies taxation) to strengthen competition
with banks

Accelerate launch of Implement mortgage refinancing by SRC Increase share of

mortgage refinancing SRC (incl., product design) credit to private sector
products in GDP driven by
mortgage growth

Design and launch Introduce mortgage guarantee REDF Increase share of

mortgage guarantee products currently not available in credit to private sector
products the market to provide access to in GDP driven by
mortgage financing, esp., for mid- to mortgage growth
low-income segments
Improve mortgage Strengthen mortgage registration Saudi Central Increase share of
registration and and enforcement practices to drive Bank (SAMA) credit to private sector
enforcement practices growth of mortgage portfolio by in GDP driven by
further protecting rights of the lenders mortgage growth

Establish infrastructure Develop regulatory and legal Saudi Central Increase contribution
for micro-finance and frameworks for micro-finance and Bank (SAMA) of micro companies
micro-insurance micro-insurance and financing to low
income segments
50 Financial Sector Development Program

Leading
Initiative name Description Expected impact
entity

Build a national online Developing a factoring platform on Saudi Central Growth of SME sector
factoring platform top of the newly developed ESAL Bank (SAMA) in the economy
e-invoicing platform

Facilitate insurance Enhance existing rules and Saudi Central Consolidation of

market M&A to increase regulations around M&A to facilitate Bank (SAMA) insurance market
scale and solvency consolidation in the insurance sector resulting in lower cost-
by clarifying / easing process of income, increased
winding up companies, resulting scale and stronger
in better capitalized insurers with balance sheet capacity
capacity and capability to better
serve market needs
Incentivize financial Nudge private sector (e.g., banks) to Saudi Central SME loans as % of
sector to finance SME increase share of lending to SME by Bank (SAMA) bank loans to 11% by
first improving existing ecosystem 2025
(e.g., restructuring of Kafalah
program, enablement of Bayan and
SIMAH to collect SME data) and then
potentially considering incentives for
SME lending
Review / introduce Adjust existing insurance regulations Saudi Central Increase protection
insurance requirements to link with the mortgage law Bank (SAMA) level of individuals
linked to mortgage law acquiring property and
lenders with property
as collateral
Introduce derivatives Establishing a market for offering and CMA Increase in institutional
trading of derivatives contracts investors’ share of
value traded

Facilitate establishment Building the infrastructure for CMA Increase Waqf funds
and development of Endowment funds offered ad managed
Endowment Funds by authorized financial
institutions

Strengthen cybersecurity Improving the cybersecurity of CMA 1) Decrease number of

capital markets through information cyber-attack incidents
exchange, monitoring and applying 2) Improve Global
international best practices Cybersecurity Index
score
Develop a fiscal risk This initiative focuses on developing MoF This initiative will result
management framework a comprehensive framework for in best practices and
classifying, assessing and monitoring interactions in risk
fiscal risks to ensure a clear management across
alignment between the public sector the financial sector
and financial sector
51 Financial Sector Development Program

Leading
Initiative name Description Expected impact
entity

Set up a unit to promote The initiative focuses on establishing MoF This initiative will
one narrative to int’l a coordinating entity to be the only lead to a better
audience source of truth for government coordination while
entities wishing to reach international communicating with
investors or vice versa. As int’l audience
international presence / participation
in the Kingdom increases, there is a
need to align between government
entities to ensure that there is a single
source of truth
Support growth and Broadening investment funds CMA 1) Increase size and
expansion of PE / VC available to sophisticated investors participation of PE /
VC funds
2) Increase startup
funding / seed funding
Simplify access to Extend reach and distribution of Saudi Central 1) Increase in savings
banking savings financial services Bank (SAMA) deposited into banking
products Develop the environment in which savings products due
alternative service providers (e.g., to increased reach in
agents, microfinance institutions) can remote areas
emerge 2) Increase in
savings deposited
into insurance
savings products
due to enhanced
bancassurance rules
Introduce incentives for Consider incentivizing banks through Saudi Central Increase in savings
banks to attract long- adjustments in regulatory ratios to Bank (SAMA) deposited into banking
term deposits promote stable and longer-term savings products due
deposits instead of current account to increased regulatory
deposits requirement needs for
private sector
Distribute certain Extend reach and increase CMA Increase in savings
collective investment penetration of collective investment deposited into
schemes through non- schemes products by enabling APs collective investment
AP entities to leverage existing distribution schemes products due
channels, including banks, to reach to ease of distribution
end consumers constraints
Develop tailored Increase savings level of low-income SDB 1) Increase in savings
product for low income segments by designing, developing deposited into savings
segments and launching savings products A/C: +1B-2B SAR /
linked to social lending year
2) Number of
additional available
types of savings
products: +1 From
available types
52 Financial Sector Development Program

Leading
Initiative name Description Expected impact
entity

Enhance QFI access Providing quick and direct access to CMA 1) Reduce time and
and account opening the Saudi Capital Market for Qualified improve convenience
process to access the Foreign Investors for QFI account
market opening process
2) Increase Foreign
Investor Ownership in
equity market cap.
3) Increase Foreign
Investor contribution
to value traded

Enable a digital process Establishing a digital KYC process CMA 1) Increase number
for investment account and investment account opening of investors in capital
opening markets
2) Increase ease
of access to Saudi
market
3) Increase fair
competition among
APs especially the
local ones
Assess feasibility Enhance the quality of audit of public CMA 1) Attract domestic
of establishing an companies, resulting in facilitating and foreign investors
independent regulatory the flow and quality of information to 2) Increase in local
structure to oversee investors to enhance transparency and foreign investor
public companies’ and reduce risk in securities confidence
audits transactions 3) Improve governance
standards
Establish financial sector Institutionalize upskilling of existing CMA Upskill knowledge,
academy covering all capabilities / knowledge/ expertise capabilities, expertise
sub-sectors across all sub-sectors on the basis of of talent force
the existing Institute of Finance

Establish a clearing Establishing a clearing house CMA 1) Increase post-trade

house based on CCP operating in line with CCP principles revenue for Saudi
principles to ensure introduction of adequate Stock Exchange
risk management methods in line with 2) Increase operational
best-in-class international standards efficiency
3) Decrease
operational risk
4) Facilitate
introduction of
dividends
Digitize KYC process Revise existing regulations to allow Saudi Central 1) Simplify and
and facilitate end-to-end digital customer on-boarding, KYC Bank (SAMA) increase access to
digital processing and end-to-end processing (e.g., banking products
e-signatures, fingerprints) 2) Enhance efficiency
of banking operations
53 Financial Sector Development Program

C. Detailing Game Changers

Objective: Enable financial institutions to support private sector growth

Game-changer I: Open financial services to new types of players

1.Description
This game-changer is owned by SAMA and focuses on enabling market entry to new
types of players (such as FinTech companies) to enhance development of the innovation
ecosystem in financial services, encourage entrepreneurship/job creation and boost
competition in the private sector, to drive innovation and quality of service.
The game changer will consist of:
• Establishment of the Central Payments Unit within SAMA to regulate payments in
the Kingdom of Saudi Arabia
• Issuance of new licenses to innovative non-banking players (such as payments and
platforms) via the sandbox
• Issuance of regulatory rules for payment service providers
• A survey of players in the FinTech field in the Kingdom, after the entry of the Saudi
entities, to identify the challenges they face and develop the FinTech sector
• Privatization of payment systems of the General Department of Payment Systems/
SADAD through the establishment of the Saudi Payments Company.
• Develop FinTech-focused funds/accelerators/incubators to enhance financing for
FinTech companies
2. Rationale
Opening financial services to non-banking players will have multiple benefits, among
which are:
• Promoting the development of an innovative ecosystem in the financial sector
• Encouraging entrepreneurship / job creation in the financial sector
• Improving service quality for consumers through increased competition
• Strengthening lending capabilities of specific sectors.
3. Estimated impact
This game-changer will have the following impact on the economy:
• Increasing the number of FinTech Players
• Almost 230 FinTech players in 2025
54 Financial Sector Development Program

Game-changer II: Drive toward a cashless society

1. Description
This game-changer is owned by SAMA and focuses on enhancing the use of digital
payment solutions by creating and developing innovative payment solutions to
facilitate financial transactions of individuals and institutions from various sectors to
reduce cash in circulation and the cost of cash on the economy and ensure greater
transparency for the government to monitor cash flows.
The game changer will consist of:
• Mada Online service
• E-Invoicing platform
• Mada Pay smartphone app
• Instant payments system
• Study the activation of e-payment services in unserved sectors and regions in the
Kingdom by providing e-payment methods
2. Rationale
• The reduction in cash in circulation will have multiple impacts on the economy,
including:
• Reduced cost of cash on the economy
• Ensure greater transparency for governments to monitor cash flows for taxation
purposes and combating commercial concealment
• Make available better information to support SME financing and facilitate
performance tracking
3. Estimated impact
This game-changer will have the following impact on the economy:
• Increasing the share of non-cash transactions (as % of total transactions):
• 70% in 2025
55 Financial Sector Development Program

Game-changer III: Strengthen compulsory motor insurance enforcement

1. Description
This game-changer is owned by SAMA and focuses on enforcing compulsory motor
insurance to reduce fraudulent practices, and continue to develop the existing insurance
sector (for example, increasing total written premiums, increasing volume, and reducing
the cost-to-income ratio).
2. Rationale
Enforcing compulsory insurance will yield multiple benefits to the private sector,
including:
• Strengthening the private insurance sector through additional written premiums
• Protecting the wealth of individuals and preserving the rights of those affected by
traffic accidents
• Increasing the scale of insurance companies and improving the cost-to-income ratio

3. Estimated impact
This game-changer will have the following impact on the economy:
• Increased depth of the insurance market (GWP / non-oil GDP):
• 2.4% in 2025
• Coverage ratio of motor insurance schemes
• 77% in 2025

Game-changer IV: Strengthen compulsory health insurance enforcement

1. Description
This game-changer is owned by SAMA and focuses on enforcing compulsory health
insurance to reduce fraudulent practices, and continue to develop the existing insurance
sector (for example, increasing total written premiums, increasing volume, and reducing
the cost-to-income ratio).
56 Financial Sector Development Program

2. Rationale
Enforcing compulsory insurance will yield multiple benefits to the private sector,
including:
• Strengthening the private insurance sector through additional written premiums
• Protecting the wealth of individuals
• Increasing the scale of insurance companies and improving the cost-to-income ratio
3. Estimated impact
This game-changer will have the following impact on the economy:
• Increased depth of the insurance market (GWP / non-oil GDP):
• 2.4% in 2025
• Coverage ratio of health insurance schemes
• 45% in 2025

Objective: Ensure the formation of an advanced capital market

Game-changer V: Inclusion of commercial governmental assets and business in

the financial market

1. Description
Identify commercial governmental assets and businesses and assess their ability to
be listed into the financial markets, by providing the required support through the
committee.
2. Rationale
The listing of state-owned commercial assets & entities will generate multiple benefits
for the Saudi financial markets, including the following:
1. A unique opportunity to increase the depth and capacity of the Saudi financial
market
2. Attracting foreign investors and institutional investments with exit opportunities
through liquid markets
3. Improving governance, performance, and efficiency to target listing companies
3. Estimated impact
Based on the initial plans of the Program to Achieve a Vision in the Listing Side, this
active initiative will have the following effects on the Saudi financial market:
• Increase the market value of the stock market as a proportion of current GDP to:
80.8% in 2025
• Increase the current participation of institutional investors as a proportion of the
total volume of consolidation to: 44% in 2025
• Increase the current ownership of foreign investors from the total market value of
free shares to: 17.5% in 2025
57 Financial Sector Development Program

Game-changer VI: Deepen debt capital markets

1. Description
This game-changer is owned by CMA and focuses on encouraging the growth of the
debt capital markets to further diversify public/private sector financing options and
create a new asset class for investors.
The game changer will consist of:
• Issuing rules governing special purpose facilities
• Amendment of debt instrument market regulations for foreign investors
• Reducing the borrowers’ cap ratio as one of the banks’ eligible capital base
• Amending securities offering rules and continuing obligations
• Improve on your subtraction model
• Study the mechanism of presenting the instruments of debt offered by a special
proposal
• Easing the requirements for the qualification of foreign investors to invest directly
in the debt instruments market
• Awareness materials for the mechanism of applying and calculating zakat for
religious instruments
2. Rationale
Increasing the depth of the debt instrument market will generate multiple benefits for
the Saudi capital market, including:
• Diversification of financing options for both the private and public sectors
• Creating a new asset class for investors
• Diversify lending and improve financial stability by lowering the cap on a single
borrower
• Providing a reliable source of funding with limited disclosure requirements for
family groups
3. Estimated impact
Based on initial plans, this effective initiative will have the following impact on the
financial market for debt instruments in Saudi Arabia:
• Size of the debt instruments market as a proportion of GDP to 24.1% by 2025
58 Financial Sector Development Program

Game-changer VII: Motivating the private sector to be listed on the Saudi stock
market

1. Description
This initiative aims to encourage the private sector to list on the Saudi financial
market, increasing the GDP contribution the market makes to the Saudi economy.
This goal will be achieved by overcoming the following challenges:
• Correcting misconceptions about inclusion by raising awareness of its importance
to companies.
• Increase the number of investment products to provide more diversified options for
investment.
• Develop the market in addition to improving it at the regulatory and operational
level.
• Provide incentives for companies and overcome the barriers they face in the way
of inclusion.
The game changer will consist of:
• Listing rules (modified)
• National Forum for Dialogue between Listed and Unlisted Companies (Annual
Trading Forum)
• Updated list of investment funds
• Allowing e-funds to be listed on the parallel market – Nomu
• Regulatory concepts for direct listing in the main market
• Allow the inclusion of ETFs on the parallel market - Nomu
• Allow the inclusion of ETFs in the main market
• Launch incentive packages
• Regulation to float and list shares of non-Saudi companies (double listing)
• Awareness workshops to raise awareness of the importance of inclusion
2. Rationale
• The initiative targets local and foreign investors at the corporate or individual level
• This initiative contributes mainly to achieving level 3 strategic objectives
(developing an advanced financial market) by overcoming the challenges
mentioned above.
3. Estimated impact
This pivotal initiative is expected to have the following effect (Excluding ARAMCO):
• Increase the number of listings on the Saudi stock market:
• 134 listing by 2025
• Raise the market capitalization (equities) ratio to GDP:
• 80.8% by 2025

Objective: Promote and enable financial planning (retirement, savings, etc.)

59 Financial Sector Development Program

Game-changer VIII: Establish National Savings Entity (government backed retail

savings products)

1. Description
This initiative contributes mainly to achieving level 3 strategic objectives, developing
an advanced financial market by overcoming the challenges mentioned above.

This game-changer is owned by Ministry of Finance and will focus on establishing

a standalone national savings entity that provides government backed savings
products, stimulates private savings by providing tailored products, bolsters
competition for savings, allows individual customers to save in government products
and provides all necessary requirements to ensure the optimal launch of the entity.
The game-changer will consist of:

• Assessment phase: result and recommendations of the first phase - approved

by FSDP committee - including but not limited to solutions related to product
provision, the nature of the products, funding and budget required to launch the
entity, the appetite of individuals for the products, market and impact studies.
• Set up the entity.
• Full launch of the entity
2. Rationale
Establishing the National Savings Entity will result in multiple financial planning
benefits in Saudi Arabia, among which are:
• Creates a successful model in stimulating supply and creating demand
• Generates funding for the financial sector
• Shares responsibility with banks in offering savings products
• Distributes government backed savings products to individuals both via banks and
through channels
3. Estimated impact
The game-changer is estimated to have the following impact on individual savings in
Saudi Arabia:
• Increase saving products in the market
• Increase in the total amount of household savings in the kingdom
• Simplify access to savings products through digital platforms
60 Financial Sector Development Program

Chapter

6
61 Financial Sector Development Program

Chapter 6

FinTech Pillar
A) FinTech Strategy
62 Financial Sector Development Program

FinTech Strategy

Introduction to FinTech Strategy

The Financial Sector Development Program (FSDP) added a fourth strategic pillar to its
transformation strategy, the FinTech Strategy pillar, which aims to achieve the aspirations set
by the Kingdom’s leadership positioning KSA as one of the leading countries in the field of
FinTech, with Riyadh becoming a global FinTech hub. Vision 2030 is transforming the lives
of Saudis and providing them with new experiences, including better access to financial
products and personal finance services. The Kingdom also seeks to harness the potential
of emerging sectors to drive job creation and economic impact, with empowered citizens as
the key growth drivers. These are reflected in the FinTech Strategy, which aims to empower
individuals and communities with greater economic access and financial awareness, as well
as drive innovation and creativity.

The Contribution of FinTech Strategy to Kingdom’s Vision 2030 and its connection to the
Financial Sector Development Program (FSDP)

FinTech Definition
“Technology-enabled innovation in financial services that could result in new business models,
applications, processes or products with an associated material effect on the provision of
financial services.” 1
The FinTech strategy contributes to achieving the strategic objectives of the Kingdom’s
Vision 2030

Enhance ease of Grow private sector's Attract foreign

doing business contribution to the economy direct investment

Nurture and support the

Develop the Develop our brightest
innovation & entrepreneurship
digital economy minds in priority fields
culture

Ensure alignment of
Source relevant foreign talent Expand vocational training
educational outputs with labor
effectively for labor market needs
market needs

Grow SME contribution to the Develop In addition to

economy e-Government 18 indirect objectives

and directly contributes to the current strategic pillars of FSDP

Enable Financial Institutions Ensure the Formation of an

to Support Advanced Promote and
Private Sector Growth Capital Market Enable Financial Planning

1
Financial Stability Board “FSB”
63 Financial Sector Development Program

2030 Aspirations
It is the Kingdom’s ambition under Vision 2030 to open the country to the world, welcoming
multinational corporations, foreign investments and global talents to take advantage of a
rapidly growing and diversified Saudi economy. Moreover, FinTech development will harness a
more globally connected Saudi economy, with a wider range of international financial products
and services being offered by companies and enjoyed by citizens. With the aim of positioning
KSA as one of the leading countries in the field of FinTech, the strategy aspires to increase
the number of FinTech companies operating in the Kingdom to 525 by 2030, which will create
approximately 18 thousand jobs in the FinTech sector, increase the sector’s GDP contribution
to SAR 13 bn, and increase the volume of venture capital investments into the sector to SAR
12 bn.

2025 Commitments
To ensure the strategy is on track to achieve its objectives, a set of milestones for 2025 have
been identified.

• Attract global FinTech players and increase the number of FinTech companies operating
in the Kingdom to 230 companies by 2025, driving innovation and competition in the
Kingdom’s financial services sector.

• Increase the share of non-cash transactions (digital transactions) amongst individuals, with
the target of reducing the use of cash to 70% by 2025.

• Raise the volume of venture capital investments into FinTech companies to SAR 2.6 bn
by 2025 through enhancing local investment and attracting foreign investment, which will
engineer growth of FinTech companies.

• Raise the contribution of the FinTech sector to KSA’s GDP to reach SAR 4.5 bn and create
approximately 6,000 jobs by 2025, which are in line with the Kingdom's goals of diversifying
the economy and empowering its labor force with future-proof skills.
64 Financial Sector Development Program

The strategy aims to transform and inject new energy into the conventional financial
sector to achieve desired economic impact

525 18K SAR 13.3 Bn

Fintech Players Fintech Jobs Direct GDP

12.2 Bn
20% Cumulative VC
FDI SAR investments

FinTech Companies FinTech Direct Jobs

525 18٬198

354
525 10٬730
230 18٬198
150 6٬277
90 354
3٬045 10٬730
1٬640
230
150
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
6٬277
90 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
3٬045
1٬640

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Fintech Direct Impact on GDP (million

13٬303 SAR) Cumulative VC Investments (million SAR)
12٬245

7٬821
13٬303 5٬645 12٬245
4٬566
2٬211 2٬599
1٬188 7٬821 742
223
5٬645
4٬566
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021 2022 2023 2024 2٬599
2025 2026 2027 2028 2029 2030
2٬211
1٬188 742
223

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
65 Financial Sector Development Program

The Kingdom carried out many reforms in recent years that resulted in great success to build
a strong foundation on the Kingdom's path to becoming a leading FinTech hub.

1. Banking Sector:
A. Percentage of financial inclusion has increased from 71% at the end of 2019 to 83% in Q3 of
2021.
B. Number of bank accounts opened digitally and e-wallets reached around 16 million during
March 2020 to Q3 of 2021.

2. Payments
A. Share of non-cash transactions in the Kingdom reached 57% in 2021, exceeding FSDP's
2021 target of 55%
B. Number of FinTech companies in the payment sector increased to 30 companies by the end
of 2021.
C. Payments executed via smart devices by individuals on Point of Sale (PoS) terminals increased
by 282% in 2021, representing approximately 35% of all payments in the Kingdom in of 2021.

3. Finance
A. Volume of financing provided by FinTech companies approximated to SAR 2 bn through
crowdfunding and buy-now-pay-later (BNPL) solutions for e-commerce by the end of 2021.
B. Number of FinTech companies in the financing sector increased to 16 by the end of 2021.

4. Insurance
A. Value of insurance policies that were underwritten through FinTech companies amounted to
around SAR 7 bn, representing about 10 million insurance policies issued by the end of 2021.
B. Number of FinTech companies in the insurance sector increased to 7 by the end of 2021.

5. Financial Market Services

A. Number of FinTech in the financial market services sector increased to 17 by the end of 2021.
B. Funds raised from equity crowdfunding and offering and debt instruments grew to SAR 153
mn at an annual aggregate rate of growth of 244% in Q3 2021.
66 Financial Sector Development Program

International benchmarking with global peers and G20 countries for FinTech

Number of FinTech Companies (2021)1

Only San Francisco
Bay region

2097 1538 602 136 82

Digital Competitiveness Index - Ranking out of 63 (2021)2

1 5 13 14 36

Technological Infrastructure - Ranking out of 63 (2020)3

1 5 14 18 30

Global Talent Competitiveness Index - Ranking out of 64 (2020)4

132
12 14 21 23 40

Entrepreneurship Index - Ranking out of 137 (2019)5

136
1 4 25 27 40

Source: 1Crunchbase database & FinTech Saudi 201819- Report | 2IMD World Digital Competitiveness Index | 3IMD World Competitiveness Index | 4Global Talent Competitiveness Index
2020 | 5Global Entrepreneurship and Development Institute
67 Financial Sector Development Program

FinTech in the Kingdom is growing at a higher pace than other leading countries in
FinTech

Normalising the journeys (by the number of years since initial point)

Annual growth rate in number of FinTech companies (%)

Emerging Phase Evolving Phase Maturing Phase

(Medium growth rate) (Highest growth rate) (lowest growth rate)
Phase’s average growth rate 20% Phase’s average growth rate 30% Phase’s average growth rate 20%

60%
UK Singapore

25% cumulative
40% growth rate for the
Kingdom

20%

0%
0 1 2 3 4 5 6 7 8 9 10

Growth rates higher than leading countries in FinTech

68 Financial Sector Development Program

International benchmarking analysies has identified key challenges to be addressed in

the FinTech Strategy to unlock the potential of the KSA market

Aligning Infrastructure with FinTech Access to Talent

Requirements
Tech infrastructure requires targeted reforms • Shortages of the digital skills that FinTech
in order to support FinTech ecosystem companies crave, such as statistical analysis,
development (cloud, data centers, AI, etc.) data mining, algorithm design. cybersecurity,
developers in emerging technologies.

• Limitations to attract/retain talents.

Channeling of Investments Ability to comply with regulations

• Despite the evidence of capital injections The difficulty in understanding, navigating

with sizable deal value, the number of deals and complying with the requisite and stringent
remains modest causing home supply and regulations in the financial sector poses a
demand mismatch challenge for new players

• The necessity of having specialized venture

capital funds to establish FinTech companies
with their head offices located in the Kingdom.

Alignment of initiatives to stimulate

Increasing Global Presence the sector
• Highlighting the kingdom’s developments in Despite the remarkable development of
FinTech, which will contribute to attracting technology infrastructure and financial services
investments the Kingdom has achieved, there still needs
to be a consistent and convergent alignment
• Enhancing the presence of Saudi FinTech
at the national level to achieve the strategy's
companies in conferences and events locally
objectives.
and globally.

• Empower of Saudi FinTech companies to

compete with their counterparts in leading
FinTech hubs.
69 Financial Sector Development Program

Building and maintaining trust in the FinTech activities require a certain methodology
that is centered around two main enablers, namely, technology prerequisites and
infrastructure enablement.

Above To build trust for the “above ground” FinTech businesses

there is a need to look at the key technologies that fuel
Ground FinTech
the growth of FinTech
Activities

• There are technical necessities or prerequisites for FinTechs to

FinTech
do business and grow
Prerequisites
Below • A cloud native FinTech service layer that cultivates FinTech use
Ground cases and adoption
• All top FinTech countries conclusively have direct & local access
to cloud native infrastructure, driven by global cloud players

Advanced Providing
Investing in human regulations and advanced technical
competencies legislation serving infrastructure that
the FinTech sector serves FinTech

Stimulate and attract investment to support FinTech services’

providers

• Improvement in affordability and latency, notwithstanding the

impressive improvement in worldwide mobile speed ranking
Infrastructure
along with rapid rollouts of 5G.
Enablers
• Internet connectivity, and specifically fixed broadband, has a
direct correlation with digital competitiveness of a country

Internet Enhancement
(Accelerate Fixed Broadband/FTTH Digital Identity Expansion
Adoption, 5G Enablement)
Foundation
70 Financial Sector Development Program

The FinTech Strategy will be measured against two KPIs that are directly influenced by
FinTech-related initiatives

TARGET
KPI DESCRIPTION 2021 2023 2025
2030

Number of The KPI aims to drive innovation in the financial sector by

90 150 230 525
FinTech players attracting the most leading FinTech players

The KPI measures the shift to non-cash transactions (digital

Share of non-
transactions) in the retail sector, to ensure transformation 55% 63% 70% 80%
cash transactions
towards reducing the use of cash

The Kingdom’s aspirations to be among the leading countries in FinTech must be

underpinned by a strategy that focuses on managing the transformation of the financial
sector in the Kingdom to achieve a long-term economic impact.

1. KSA Global FinTech Positioning

• Promote the Kingdom’s position in the FinTech sector globally and regionally through
tailored media plans and programs.

2. Regulatory framework
• Enhance trust and mitigate risks by implementing regulation of international standards,
coupled with a forward-looking vision of reaping the benefit of FinTech development.

3. Market and Funding

• Launch programs that support the establishment, market entry, growth, and development
of FinTech companies.

4. Talent Development
• Strengthen the country’s know-how of FinTech by grooming FinTech talents across
regulatory authorities, financial services sector, schools and other relevant sectors.

5. Enabling Technical Infrastructure

• Enhance technology enablers to drive the development of innovative solutions such as
cloud services, cybersecurity, Internet of things (IoT), artificial intelligence (AI) and open
banking application .

6. Local and International Collaboration

• Launch programs to enhance interdependence and collaboration in the FinTech sector
locally and internationally.
71 Financial Sector Development Program

The FinTech Strategy Vision comprises 6 transformational drivers and 11 initiatives, each
designed to bolster the KSA FinTech Ecosystem

Positioning KSA Global FinTech Positioning

Strategic global positioning and marketing

campaigns to build the image of KSA as a
FinTech leader and boost global awareness of
KSA market, with a focused study in the first
year to define the multiyear global positioning
roadmap
Nurture FinTech Knowledge
in the Kingdom
Upskill existing workforce in the FS Talents
industry and train Regulators on FinTech,
while building local workforce with digital
and future-proof skills through internship
programs
Accelerate Cloud for FinTech

Enhance FinTech-related Accelerate the development of cloud

infrastructure in the Kingdom through the
innovation within the Central introduction of incentives for providers
Bank and expansion of emerging technology

Technology
platforms
Develop and implement Suptech solutions
within the Central Bank to support its risk-
Develop Emerging Technology
based supervisory role
Policies and Accelerators
Regulatory Enablement for Develop regulation (policies, regulatory
frameworks) and financial (accelerators)
FinTech in the Central Bank solutions to support emerging technologies
Space companies

Regulatory
Review the current FS regulatory Implement and Activate the Open
framework to allow FinTech to operate

Framework
more efficiently in the KSA market and Banking Practice in the Kingdom
to enable access for new players, also Develop Open API standards and a platform that
through an enhanced sandbox and allows FinTech companies to easily and safely
developed open API standards connect with other FS companies

Regulatory Enablement for

FinTech in the Capital Market
Authority (CMA)
Review the current Capital Market
regulatory framework to allow FinTech
Market and Enable FinTech Saudi as the
to operate more efficiently in the KSA
market, issue new regulations to
Funding Market Driver
facilitate development of innovative Build up FinTech Saudi’s role to develop and
support the FinTech ecosystem in KSA by
products and develop SupTech
enhancing its operating model and capacity,
solutions within the CMA to support its developing accelerator programs and facilitating
supervisory role knowledge sharing with the FinTech panel

Determine Financial Support

Orchestrate Collaboration
mechanisms for FinTechs in the
Locally and Globally to Lead Collaboration Kingdom
with Purpose
Define the strategy to provide financial support
Collaborate with global strategic mechanisms for FinTechs in the Kingdom
partners and FinTech hubs through
launching a program for international
strategic partnerships between the
Kingdom and the countries with
advanced experiences.
72 Financial Sector Development Program

The FinTech strategy took into account the sector’s 5 strategic verticals with the aim of
creating a vibrant and diverse FinTech industry in KSA
The FSB understands FinTech as technologically enabled innovation in financial services
that could inject new energy into the financial sector through creating new business models,
applications, processes or products which will improve and automate the delivery of financial
services

Financial Services areas that FinTech companies operate in

Payments Capital Markets Services1

• Mobile Wallets • High frequency trading

• P2P transfers • Social trading
• Virtual Assets • E-Trading
• Payments aggregator • Robo Advisory
• Payments initiator • Tokenized assets
• International money transfer • Crowdfunding equity
• Debt instruments
Lending
Insurance
• Crowdfunding
• Marketplaces lending • Digital Insurance
• Digital Channels2 • Insurance aggregators
• Credit scoring • Wearable IoT
• Alternative underwriting platforms
• Finance Aggregator

Data

• Personal and Business Financial Management (PFM, BFM)

• RegTech (audit, risk and regulatory compliance software) / Suptech

Market Support

• Ecosystem (API, Infrastructure, ..)

• Data Application (Big Data Analysis, Machine learning, …)
• Distributed Ledger Technology / DLT application / smart contracts / Blockchain
• Security (KYC, Customer Identification,…)
• Cloud Computing

Policy Enablers

• PSSL • Open banking • Innovation

• Cybersecurity • Digital Identity Facilitators
• Data Protection
1: Capital Markets services are under the licensing control of CMA
2: Includes savings and deposits
73 Financial Sector Development Program

The FinTech Strategy’s execution plan will leverage verticals with various level of maturity.

Strategy execution is rapid and multidimensional and caters for market relevance,
regulatory focus and infrastructure enablement.

Future Solutions

• Payments: P2P instant payments, Virtual Assets, C2B payments, B2B payments,
IoT based (cameras, sensors)
• Capital Markets Services: Social trading, security tokens, ML on investment
insights and user behavior
• Lending: credit scoring, alternative underwriting
• Insurance: Wearables & Telematics (IoT), Claim management, Smart Contracts,
ML Auto-underwriting
• Data: scalable data storage and analytics, DLT-based data management

Strategy execution is rapid and

multidimensional and caters for
Market Relevance, Regulatory
Focus and Infrastructure
Enablement

Current Solutions

• Payment: mobile wallets, payments aggregators, e-gateways

• Capital Markets Services: Crowdfunding, Robo-advisors
• Lending: Crowdfunding, Digital banking channels, Micro lending
• Insurance: Aggregation, Travel insurance, Loss adjusting (AI based)
• Data: E-supervision, SupTech, Financial Planning
74 Financial Sector Development Program

In a FinTech-enabled digital economy, the ultimate currency in

which stakeholders transact is trust
Demonstrating the trustworthiness of a FinTech-driven digital economy would lead to a
sustainable ecosystem and move the Kingdom closer to its ambition.

Information is
protected and
secure

Technology Regulations
infrastructure maintain
is scalable, integrity and
resilient, stability
& connected

Trust
People are Strategic
empowered interventions
with future bring desired
ready skills and outcomes
tools

Investment
decisions are
well informed

At a global level, the challenge that policymakers encounter is how to take full advantage
of FinTech while managing the potential risks on the financial sector

To enable innovation in FinTech companies, it is necessary to ensure the availability of controls

and measures that balance growth and managing financial and customer-related risks

FinTech can support growth However, FinTech may pose

by promoting financial risks to consumers, investor,
development, financial and more broadly, the
inclusion, and performance financial stability and market’s
efficiencies integrity
75 Financial Sector Development Program

Globally, Financial Sector regulators are leading a holistic and balanced approach to
accelerate the adoption of FinTech and minimize the levels of risks

Fraud Management
Financial Market Integrity & Consumer
& Conduct Cybersecurity
Stability Protection

Concentration/Fragmentation Anti-Money Laundering Cyberthreat Fraud

(AML) /Combating the
• Growing systemic importance Financing of Terrorism • Increased interconnectivity • FinTech technologies can
of Players (“too-big-to-fail”), (CFT) and surge in online be exploited by criminals
concentration among service financial transactions to commit fraudulent
providers (an operational failure • Raised complexity in cause wider the damage activities
can disrupt multiple FS market monitoring transactions that a cyber-attack could
participants) (cross-border) have on the national
economy
• Fragmentation of financial • New players outside of the
services among FinTech and scope of FS Regulators
traditional banks

• Volatility
Market Failure Misselling
• Potential capital market
volatility due to new • Unregulated FinTech can be • New distribution and
companies and products source of market failures more complex value chain
(over-reaction to news) impacting the FS Industry expose consumers to
fraudulent activities
• Increased volatility of deposits, • Companies of small size
higher liquidity risk for banks and capacity are exposed to
and volatility of their funding compliance risk (consumers
sources and data protection)

Collaborate and share FinTech Upskilling Enhance FinTech regulations

Mitigating knowledge with other
Government entities and the
(regulators, financial sector
and public)
in existing legislative
framework while developing
actions Private Sector new regulations

RegTech and SupTech Regulatory Sandboxes

76 Financial Sector Development Program

Initiatives Portfolio
The FinTech Strategy includes 11 strategic initiatives, each designed to bolster the KSA FinTech
ecosystem. The initiatives are designed to fill current gaps in the sector taking into account
international best practices

FSDP INDICATORS
INITIATIVE DESCRIPTION LEADER AFFECTED BY THE
INITIATIVE

Accelerate Cloud for Accelerate the development Ministry of Commu- 1) Number of FinTech
FinTech of the cloud infrastructure nications and Infor- players
in the Kingdom through the mation Technology
introduction of incentives for (MCIT)
providers and expansion of
emerging technology platforms

Develop Emerging Develop regulation (policies, reg- Ministry of Commu- 1) Number of FinTech
Technology Policies ulatory frameworks) and finan- nications and Infor- players
and Support Acceler- cial solutions (accelerators) to mation Technology
ators support emerging technologies (MCIT)
companies

Implement and Acti- The objective of this initiative Saudi Central Bank 1) Share of non-cash
vate the Open Bank- is to strategize, design, and (SAMA) transactions share
ing Practice in the implement the Open Banking as 2) Number of FinTech
Kingdom a practice in the Kingdom players

Enhance FinTech-re- Supervisory role in ensuring Saudi Central Bank 1) Number of FinTech
lated innovation with- financial market stability through (SAMA) players
in the Central Bank the use of data and technology
solutions (SupTech) to boost
capacity and reach; and stream-
line operations in support of
the Central Bank’s role quest of
mitigating risks and maintaining
market stability.

Regulatory Enable- Review the current FS regulatory Saudi Central Bank 1) Number of FinTech
ment for FinTech in framework, and update as (SAMA) players
the Central Bank required, to allow FinTech to
Space operate more efficiently in the
KSA market and to enable
access for new players,
supported by an enhanced
sandbox and developed open
API standards
77 Financial Sector Development Program

FSDP INDICATORS
INITIATIVE DESCRIPTION LEADER AFFECTED BY THE
INITIATIVE

Regulatory Enable- Addressing FinTech gaps in the Capital Market 1) Number of FinTech
ment for FinTech in current regulatory framework and Authority (CMA) players
the Capital Markets the market
space

Determine Financial Identify the appropriate channels Small and Medi- 1) Number of FinTech
Support Mechanisms and design the mechanism that will um Enterprises players
for FinTechs in the provide financial support and incen- General Authori-
Kingdom tives to players in the competitive ty (Monsha'at)
FinTech ecosystem.

KSA Global FinTech The goal is to position the KSA FinTech Saudi 1) Number of FinTech
Positioning as a leading global FinTech hub players
via a series of strategic social
media and marketing campaigns,
which are multistage and progress
gradually in tandem with the growth
and development of the KSA’s
FinTech ecosystem. A holistic
positioning blueprint will be first
determined via a comprehensive
study to determine the multistage
implementation roadmap.

Nurture FinTech Upskill existing workforce in the FS FinTech Saudi 1) Number of FinTech
Knowledge in the industry and train Regulators on players
Kingdom FinTech, while building local work-
force with digital and future-proof
skills of the Future through in-
ternship programs. This includes
providing high-tech educational
programs related to FinTech emerg-
ing technologies and programming
languages.

Enable FinTech Saudi Build up FinTech Saudi’s role to FinTech Saudi 1) Number of FinTech
as the Market Driver develop and support the FinTech players
ecosystem in KSA by enhancing
its operating model and capacity,
fostering a digital entrepreneurship
culture, developing accelerator pro-
grams, and facilitating knowledge
sharing by establishing a FinTech
panel.

Orchestrate Collab- Collaborate with the global strategic FinTech Saudi 1) Number of FinTech
oration Locally and partners and FinTech hubs through players
Globally to Lead with launching a program for internation-
Purpose al strategic partnerships between
the Kingdom and the countries with
advanced experiences.
78 Financial Sector Development Program

Chapter

7
79 Financial Sector Development Program

Chapter 7

Other FSDP Concentrations

A) Islamic Finance Strategy
80 Financial Sector Development Program

Islamic Finance Strategy Description

The Islamic Finance strategy aims to uplift the Islamic finance industry in the Kingdom
of Saudi Arabia and position it as a global benchmark through “Enhancing KSA’s
international position as the leader in the Islamic World”, “Enhancing and developing
the IF sector governance”, and “Developing and enhancing the capabilities to support
the growth of the sector”.

Saudi Arabia Contribution to Islamic Finance

Historically, Saudi scholars and Saudi institutions have contributed significantly to the
shape and growth of the Islamic finance industry. Many institutions that provided
the shari’ah foundation for Islamic finance were established in the Kingdom and are
still operating to date. The Islamic Development Bank, for example, aims to promote
global development that is underpinned by shari’ah complaint long term sustainable
and ethical financing structures, as global leaders in Islamic Finance. Many countries
in the Islamic world utilized the bank to build the necessary infrastructure for fostering
Islamic finance.

Islamic Finance Strategy and Relation to Vision 2030

Direct Level 3 Objectives

Level 1 Objectives Level 2 Objectives Level 3 Objectives

Strengthen Islamic values & national Grow contribution of the private sector
Enhance ease of doing business
1
Vibrant identify to the economy

Society
Maximize value captured from the energy Unlock state-owned assets for the Private
sector Sector
2 Enable fulfilling lives
Unlock potential of non-oil sector Privatize selected government services

3 Grow & diversify the economy Grow the Public Investment Fund’s assets Ensure the formation of an advanced
A Thriving and role as a growth engine capital market
Economy Position KSA as a global logistic hub
Create special zones & rehabilitate
4 Increase employment economic cities
Further integrate Saudi economy regionally
Attract foreign direct investment
An 5 Enhance government effectiveness
& globally

Ambitious Grow non-oil exports Promote & enable financial planning

Nation 6 Enable social responsibility
Enable citizen responsibility Support growth of nonprofit sector

Empower nonprofit organization to

Enable social contribution of businesses
create a deeper impact

Enable larger impact of non-profit sector

81 Financial Sector Development Program

Indirect Level 3 Objectives

Enhance ease of doing business 3.1.1 3.3.2 Develop the digital economy

Develop economic ties with the region Grow SME contribution to the
3.6.2 4.3.2
beyond GCC economy

Grow productive families’ contribution Enhance effectiveness of financial planning

4.3.3 5.1.1
to the economy & efficiency of government spending

Enhance businesses' focus on their Enhance businesses' focus on the

6.2.1 6.2.2
social responsibilities sustainability of the economy

2025 commitments
To help accomplish the aspirations and commitments of the strategy, a set of
commitments have been identified to work towards achieving these aspirations by the
year 2025.

First, to reach the desired aspiration in terms of value of Islamic assets, the strategy
commits to increasing the percentage of total Islamic finance assets locally to total
Islamic finance assets globally to approximately 22.5% by 2025 from 21% in 2018.
In addition, the strategy will aim to increasing the percentage of total Islamic finance
assets locally to GDP to approximately 79.3% by 2025 from 21.08% recorded in 2018.

Second, to ensure proper enhancement to the Islamic finance shari’ah governance

framework, the strategy commits to increasing by 2025 the number of distinct shari’ah
scholars to total Islamic finance institutions to approximately 1.6 distinct shari’ah
scholars per institution from 0.50 recorded in 2018 and increasing the percentage
of Saudi scholars to seats on selected international organizations and institutions to
approximately 23% from 16.07% recorded in 2018.

Finally, to support the strategy’s aspiration on further enhancing specialized Islamic

finance research, development, and educational centers, the strategy commits by 2025
to increasing the number of publications related to Islamic finance to more than 60
publications per year from 19 publications recorded in 2018.
82 Financial Sector Development Program

Current Challenges
Shari’ah Committees

The Islamic Finance industry lacks a clear shari’ah compliance governance structure
that should act as the backbone of the sector. As a result, shari’ah committees across
all financial institution within the kingdom operate in a different manner. Having a
Sharia governance framework will contribute to enhancing confidence and greater
independence of Sharia decisions in line with the relevant international best practices.

Internal Shari’ah Auditing

Internal Sharia audit contributes to enhancing confidence in the Islamic products

offered by the financial institutions. It will also enhance the protection of clients who
are interested in Islamic products.

Shari’ah Compliance

The Sharia Compliance Department contributes to enhancing confidence in Islamic

financial products. It also contributes to improving the legal compliance with the relevant
decisions of the Sharia committee within the financial institution.

Central Shari’ah Board

International experiences differ regarding the organization and functions of the central
Sharia bodies concerned with the financial sector. The practices differ according to the
different regulations and composition of the financial sector in each country. There is
currently no presence for a central sharia body for the financial sector in the Kingdom.
83 Financial Sector Development Program

Resolving the above issues with the industry governance requires a comprehensive
governance model that will ultimately have a positive impact on the following:

• Decreasing the risks of the financial system

• Improve transparency and protect the investor

• Remove the appearance of conflict of interest

• Enhance the efficiency of the sector

• Increase financial inclusion

International Positioning

The strategy aims to strengthen the global position of the Kingdom of Saudi Arabia in
the Islamic finance sector, as it has the largest share of the Islamic finance sector in
the world. The strategy will also contribute to the necessary marketing and incentives
to spread the tremendous capabilities that the Kingdom is undertaking in this sector.
Whereas the Kingdom possesses adequate financial and intellectual capital to promote
this sector locally and market it internationally, and this will allow attracting more assets
and influence in the Islamic finance sector.

Education, Training, and R&D

The strategy seeks to raise the quality and quantity of educational programs, resulting
in the presence of qualified capabilities for the requirements of the sector and the
market. Therefore, the strategy will contribute to the promotion and innovation of
specialized training programs for employees and institutions locally. Ensuring that the
sector employees are aware of all innovations, developments, and new products in the
sector.
84 Financial Sector Development Program

Number of Academic and Non-Academic Islamic Finance Institutions (2018)

88
86
86
44
43

19

0 10 20 30 40 50 60 70 80 90
Total Non-academic institutes Academic Institutions (univesities/colleges)

The number of certificates offered in the field of Islamic finance worldwide is 202, 90%
of which focus on Islamic banking services. A gap still exists in the areas of Islamic
assets, Islamic insurance, alternative Islamic investments, and insurance practices.

There are also currently a small number of scholars who occupy the majority of seats
on the Sharia committees in financial institutions.

Number of Shari'ah Scholars (as of 2017)

195

181

140

89

79

0 20 40 60 80 100 120 140 160 180 200

Source: Thomson Reuters Islamic Finance Development Report 2018 and IFC analysis
85 Financial Sector Development Program

Many universities provide programs in Islamic finance, yet there is still a need to promote
studies and research on Islamic financial products and increase its innovation.

Number of Islamic Finance Research Papers (2015-2017)

700
626
600

500

400
310
300

200
118
100 86 73

FSDP Islamic Finance Strategy

This section consists of strategic goals, sub-goals, and initiatives

Strategic Goals

For the kingdom to become the Islamic Finance capital of the world by 2030, we have
identified three strategic goals:

1 2 3
Governance International Education,
Positioning R&D, and
Innovation

Enhance and Enhance KSA’s Develop and

develop the international enhance the
Islamic finance position as the educational and
industry leader in Islamic research
governance finance institutions to
support the growth
of the sector
86 Financial Sector Development Program

Sub Goals

Seven sub goals have been identified under the strategic goals of this strategy to
position the Islamic Finance sector in the Kingdom as a global sector leader.

Governance

To enhance and develop the Islamic finance industry governance, the strategy has 3
sub goals:

i. Enhancing shari’ah governance structure and increasing transparency.

ii. Reducing legal risks and cost of doing business

iii. Increasing efficiency and transparency

International Positioning

To enhance KSA’s international position as the leader in Islamic finance, the strategy
has 2 sub goals:

i. Driving recognition as a sector leader

ii. Enhancing sector capacity and superiority

Education, R&D, and Innovation

To develop and enhance the educational and research institutes to support the growth
of the sector, the strategy has 2 sub goals:

i. Enhancing workforce capabilities

ii. Increasing diversity of products/services through innovation

87 Financial Sector Development Program

Strategic Considerations

The Program took a number of decisions regarding the strategic considerations present
within the framework of the program based on the following standard analyzes and
studies:

Topic Description Decision taken

Financial stability The strategy has prudently When drafting the strategy, financial stability was
considered financial stability one of the main considerations that was taken.
when trying to achieve the de- The objective of this consideration is to ensure
sired growth and depth in the that deepening and uplifting the Islamic finance
industry does not affect in any way the financial
Islamic finance industry stability of the Kingdom. Hence the strategy has
taken a phased approach in implementing some
of the initiatives, specifically in one of the strate-
gic objectives “Enhance and develop the Islamic
finance industry governance”. The strategy also
took into consideration further solidifying the
financial sector in the kingdom through partici-
pating in achieving the diversification objective
of the Kingdom’s Vision 2030. The strategy also
supports the independence of the regulatory
bodies in conducting their supervisory role in the
sector.
Shari’ah perspec- The strategy has taken into While developing the strategy, various shari’ah
tive account various shari’ah per- perspectives were taken into consideration. For
spectives to identify the right example, the strategy was designed to ensure
focus to further enhance the full independence of shari’ah scholars that are
experts in the field of Islamic finance. The strate-
sector gy also introduced multiple initiatives to enhance
the governance structure that aims to ensure
proper shari’ah decisions are made across the
sector and across the various levels (i.e., board,
management, employee, and customers).
Legal implications The strategy considered The strategy carefully studied the legal implica-
carefully the implications and tions of all the objectives, sub objectives, and
timing of any changes to the the initiatives. Hence the strategy adopted the
legal setup within the King- phasing approach on all initiatives that might
have any implication on the legal system in the
dom Kingdom.
88 Financial Sector Development Program

Interdependencies with other Vision Realization Programs

Interdependencies VRP Considerations

Housing initiatives directly Housing Program The strategy took into account the interdependen-
interact with the Islam- cy in the mortgage market with the Islamic finance
ic finance industry, as all industry and ensured that all the initiatives are in
mortgages in the kingdom line with the objectives of the housing program
are shari’ah compliant and do not hinder the growth they aspire to reach.
The strategy also aims to enhance the mortgages
that are shari’ah compliant through the gover-
nance strategic objective
One of the Hajj and Omrah Doyof Al Rahman This strategy contains initiatives that do not hinder
Program objectives is to Program or obstruct the objectives of the Hajj and Omrah
provide the best and most Program. The strategy is in line with what the Hajj
suitable service to the Mus- and Omrah Program aspire to reach, specifically
lims performing Hajj and in providing the best services to the visitors of the
Omrah two holy mosques.

Several programs aim to Privatization Pro- The strategy aims to improve access to shari’ah
enhance and develop the gram, Housing compliant funding sources for the private sector in
business environment in Program, NIDLP, the Kingdom and globally. By which, the strategy
the Kingdom, which is and the Public will diversify the sources of funding available in
impacted directly by the Investment Fund the financial sector, which will benefit all relevant
Islamic finance industry Program programs. The strategy ensured that all the initia-
tives do not affect in any way the advancement of
other initiatives in other programs.

The increased revenue from Fiscal Sustainability One of the initiatives that are housed under the
fees and taxes resulting Program strategy focuses on attracting foreign investors
from growing the Islamic and customers to invest or use the local Islamic
finance asset finance industry. This in result will increase the
fees and taxes that the government has put in
place. The strategy ensured that all activities and
initiatives under the strategy do not contradict the
objectives of the fiscal balance program, it en-
sures alignment.

National Industrial Development and Logistics Program

89 Financial Sector Development Program

Interdependencies VRP Considerations

The Islamic finance Privatization With the strategy playing a role in diversifying
industry is affected and Program, Housing the economy and diversifying the sources of
impacts capital markets, Program, NIDLP, funding, development of the capital market is
hence the interdepen- and the Public affected. The strategy took into consideration
dency with the capital Investment Fund all the initiatives and objectives that are
market development Program related to the advancement of the capital
objectives of many pro- market and ensured alignment as well as
grams ensured that the initiatives do not hinder any
of the existing initiatives

Initiatives Portfolio

Based on the strategy’s aspirations, commitments, goals, and sub goals, the
strategy has identified 11 initiatives that aim to achieve the Program’s aspirations
and commitments. All initiatives have been linked to the goals and sub goals that the
strategy has identified.

1
Organizing the work of shari’ah Organize work of oversight and
Committees in financial institutions internal shari’ah audit in financial
institutions
Governance
Organize the functions of shari’ah Establishing and Organizing the
compliance in financial institutions work of the Central shari’ah Board

2
Holding the Saudi international Activate Islamic financing sources in Launch Global Sharia
annual Islamic finance conference large Vision programs Compliant Indices
Internationa
l Positioning Launch of the King Salman Study Launching an International
International Award in Islamic Islamic Finance Saudi Center
Finance

3
Develop higher education courses Activation of an Islamic Finance
Education, and programs in the Islamic finance
field
research and development center

R&D, and
Innovation Support workers capabilities in the
sector through training programs

The initiatives were designed to bridge the gap in the sector and to ultimately achieve
the goals of the strategy and uplift the Islamic finance industry. The initiatives took into
consideration current gaps in the sector, international best practices, and the views of
subject matter experts in the field of Islamic finance.
90 Financial Sector Development Program

Governance Strategic Goal Initiatives: Enhance and develop the Islamic finance
industry governance

Initiative Description Owner Expected Impact

Organizing Issue clear regulations to govern SAMA / Positive effect on en-

the work shari’ah committees in financial insti- CMA hancing the financial
of shari’ah tutions and its members. For example, stability and financial
Committees and not limited to, dictate on minimum inclusion as a result of
in financial number of members, membership qual- increased trust within
institutions ifications, responsibilities and authoriza- the Islamic finance in-
tions of the shari’ah committees dustry as well as deep-
ening the value of the
Islamic finance industry
locally.
Organize the Organize the functions of shari’ah SAMA / Increase of confidence
functions compliance in financial institutions, for CMA in the Islamic finance
of shari’ah example studying the products and industry, specifically to
compliance contracts before implementation with financial institutions,
in financial clients. In addition, the function will be as shari’ah compliant
institutions responsible for conveying the resolu- products and services
tions made by the shari’ah committee to issues and mistrust will
the management of financial institutions, reduce due to the avail-
as well as, its role in the development of ability of a compliance
contracts and products function.

Organize Organize the work of overseeing and in- SAMA / Increase of confidence
the work of ternal shari’ah auditing in financial insti- CMA in the Islamic finance
oversight tutions. For example, and not limited to, industry, specifically to
and internal oversight on the application of shari’ah financial institutions,
shari’ah audit committee resolutions relating to the as shari’ah compliant
in financial financial institutions' contracts and products and services
institutions products, and prepare regular reports issues and mistrust
presented to the shari’ah committee. will reduce due to the
availability of an internal
audit function.
Establishing Developing the framework of establish- CMA Increase trust in all
and Organiz- ing the shari’ah Board, with the focus on shari’ah compliance
ing the work financial institutions overseen by CMA. products offered by
of the Cen- The board's goal is to play a supporting financial institutions as
tral shari’ah role to oversight in achieving shari’ah well as decrease the
Board governance and customize the global possibility of manipula-
standards to the Saudi environment. tion in shari’ah compli-
Following the launch of the board at ant products
CMA, an assessment is to be done on
of the need to replicate it for institutions
overseen by SAMA.
91 Financial Sector Development Program

International Positioning Strategic Goal Initiatives: Enhance KSA’s international

position as the leader in Islamic finance

Initiative Description Owner Expected Impact

Holding the Holding a conference Ministry of The conference is expected to

Saudi in- that focuses solely on Finance position the Kingdom as the
ternational showcasing and promoting leader in the Islamic finance
annual Islamic the Islamic finance industry industry. In addition, hosting
finance con- of the kingdom as well such a conference will act as
ference as showcasing industry a tool to discuss issues and
trends. The conference products that would ultimately
should also attract major benefit the local sector. Holding
international players in the such a conference will also act
Islamic finance industry as a market place where global
to participate in the financial institutions could use it
conference. to finalize financial transactions
and deals that ultimately benefit
the sector, including the local
sector.
Launch of the The launch of a major Ministry of The award will contribute to:
International annual award, the most Finance 1- Appreciation of the efforts
Award in important in the industry made in developing
Islamic worldwide. The winners are Islamic finance sector.
Finance honored annually at a grand 2- drive further investments in
celebration of the annual research and development in the
Saudi International Islamic sector, which will positively affect
Finance Conference. the size and depth of the sector,
especially in the Kingdom.

Activate Is- This initiative aims to en- Ministry of Decreasing cost of funding for
lamic financ- courage government en- Finance government projects, deepening
ing sources tities that plan to acquire the Islamic finance assets in Sau-
in large Vision financing, either debt and/ di Arabia including debt and equi-
programs or hybrid, to prioritize the ty capital markets, strengthening
use of Islamic financing and the positioning of Saudi Arabia in
shari’ah compliant sources the global Islamic finance indus-
of funding. try.

Launch Launch shari’ah compliant Tadawul 1-Makes the Kingdom a market

Global Sharia indices with the aim of leader in Islamic Finance.
Compliant acting as a benchmark 2-Deepening the Islamic finance
Indices provider for any investor sector in the Kingdom by
looking into shari’ah reducing costs of research and
compliant investment in the investment.
kingdom. 3- Create specialized jobs to
operate these indices.
92 Financial Sector Development Program

Education, R&D, and Innovation Strategic Goal Initiatives: Develop and enhance
the educational and research institutes to support the growth of the sector

Initiative Description Owner Expected Impact

Develop high- Reassess the higher Ministry of It will impact the quality of
er education education curriculum and Education education positively, which will
courses and redesign to keep up with result in a workforce that is well
programs in the advances in the theory positioned to add value to the
the Islamic and application/practices of sector and eventually increase
finance field Islamic finance and in the its contribution to increase the
financial sector products growth of Saudi economy.
and services.

Support Design and launch Ministry of 1-The initiative will directly

workers professional and/ Education impact on the capabilities of the
capabilities or specialized training work force in the Islamic finance
in the sector programs for in all Islamic industry
through finance industries, focusing 2-It will impact the size and depth
training on technical and practical of the sector in the Kingdom
programs aspects. And it will be and its contribution to growth of
compulsory for financial Saudi economy.
institutions to provide 3-It will also give participants
minimum hours of training in the sector other than the
for the audit, compliance, workforce, such as scholars,
external audit employees practitioners, and leaders more
and any other employee skills and capabilities to be better
that have direct interaction informed in making decisions and
with products or services ensuring a better future for the
related to Islamic Finance. Islamic finance industry.

Activation of This initiative aims to ac- Ministry of Such a research center would
an Islamic tivate an Islamic Finance Finance impact the overall Islamic finance
Finance research and development industry by acting as a research
research and center, focusing on ap- and development arm that spe-
development plied research and seeking cializes in introducing to the sec-
center to develop solutions and tor new and innovative shari’ah
products related to the compliant products and services
Kingdom’s Islamic Finance that all local players in the sector
industry. The center is to could benefit from. Providing new
focus on the applied re- products and services that ulti-
search and development, mately increase the attractiveness
as there are many entities and credibility to the local sector.
focusing currently on aca- Also, such a center strengthens
demic and basic theoretical the position of the Kingdom as a
research. global leader in Islamic finance.
93 Financial Sector Development Program

Chapter

8
94 Financial Sector Development Program

Chapter 8

Enablers
A ) Governance Model

B ) Risk Mitigation and Required Actions

95 Financial Sector Development Program

A. Governance Model

A. Proposed Implementation Management Model

The proposed implementation management model for the Financial Sector Development
Program will include the following elements:
The FSDP Committee:
• HE. Minister of Finance – Chairman of the Committee.
• HE. Minister of Investment – Member.
• HE. Minister of Economy and Planning - Member.
• HE. Governor of Saudi Central Bank – Member.
• HE. Chairman of the Capital Market Authority – Member.
• The Governor of Small and Medium Enterprises General Authority - Member.
• The Head of Global Capital Finance at Public Investment Fund - Member.
FSDP Office:
• Program Manager
• FSDP Staff
• FSDP Initiatives Owners
• Other stakeholders will be invited, each according to its relevance to the issues discussed,
and this includes representatives of the private sector

B. Proposed Roles and Responsibilities

The proposed roles and responsibilities of the components of the Management Model outlined
above will include:
• Financial Sector Development Program Committee:
• Meet on a monthly basis.
• Monitor and report on the implementation of program initiatives.
• Monitor and report on program indicators.
• Resolve implementation issues escalated by relevant entities.
• Program Management Office (PMO):
• Follow-up on implementation on a regular basis
• Continuously communicate with relevant entities
• Follow-up on the status and report on program initiatives
• Follow up and report on program indicators
• Resolve implementation issues escalated by relevant entities
• Provide necessary delivery support, if necessary
• Escalate issues, if necessary
• Owners of initiatives:
• Lead and implement individual initiatives.
• Review progress.
• Daily manage the implementation teams.
• Report progress on implementation to the PMO.
• Identify issues and escalate for resolution, if necessary.
96 Financial Sector Development Program

B. Risk Mitigation and Required Actions

The implementation and development of this program may be hindered by several internal
or external risks. A detailed list of the most critical risks has been identified; mitigation plans
have been developed to address these risks to continue with the timely implementation of the
program.

Entity Timeframe
Key Risk name and Type Risk mitigation responsible to implement
initiative description of risk measure for the these
measures measures

Open Finan- Limited avail- Program- Develop FinTech Fund of Upon approval
cial Services ability of equity / specific focused funds/ accel- Funds of Game-
to new types seed funding for erators/ incubators to Changer
of players FinTech start-ups enhance funding for “Open FS to
FinTech companies new types of
players”
Lack of qualified Program- Financial Sector Financial Upon approval
professionals in specific Academy to develop Sector Acad- of initiative
the FinTech eco- dedicated develop- emy “Establish
system ment/ educational/ Financial
training programs for Sector
FinTech companies Academy
across all sub-
sectors”
Customer protec- Program- Develop consumer SAMA Upon approval
tion risk specific protection framework of Game-
as part of new Regu- Changer
lations “Open FS to
new types of
players”
Incentivize Low demand for General Government allocat- SAMA Mitigation
financial sec- SME financing ing more contracts action can
tor to finance directly to SME and be started as
SME implementation of soon as pos-
wider initiatives by sible
SME authority

Drive toward Delays in Program- Introduce additional SAMA Upon approval

cashless improvement specific initiatives in a phased of Game-
society of financial manner, after financial Changer
inclusion may inclusion index has “Incentivize
delay achieving reached a certain fin. Sector to
cashless society value (e.g., 85%) finance SME”
targets
97 Financial Sector Development Program

Entity Timeframe
Key Risk name and Type Risk mitigation responsible to implement
initiative description of risk measure for the these
measures measures

Enforce Delays in the Program- Ensure coordination SAMA Upon approval

mandatory enforcement of specific and commitment of of Game-
insurance new procedures involved entities (e.g., Changer
that could hinder Ministry of Interior) “Incentivize
growth of the fin. Sector to
sector and pose finance SME”
moral risk toward
law-abiding
citizens
Deepen Lack of investor General Implementation of National Upon launch
debt capital appetite to initiatives related to Savings of National
markets invest in debt increasing private Entity / Savings
instruments savings (e.g., savings National Entity / Retail
sukuks, NSE) and Debt Savings
attracting foreign management Sukuks
investors Center /
CMA
Limited appetite General Introduce private CMA / SAMA Upon approval
by private sector placement model to of Game-
to tap into DCM incentivize private Changer
for funding companies to use “Deepen
DCM and reduce debt capital
single obligor limit markets”
to diversify lending
books of banks

Setup a Difficulty in Program- Ensure alignment MOF Upon

National obtaining specific / buy-in from approval
Savings required license senior leadership of Game-
Entity to operate / stakeholders Changer
through extensive “Setup a
and focused National
communication Savings
Entity”
Limited appetite General Launch large NSE – once Upon launch
from consumers scale marketing setup of National
to products campaigns and Savings
offered amend product Entity
structures, where
needed
98 Financial Sector Development Program

References

1. Saudi Central Bank

2. OECD Data
3. Euro Data Monitor (2016)
4. Capital Market Authority
5. Thomson Reuters Data
6. Ministry of Finance
7. Saudi Vision 2030
8. Analysis of the Financial Sector Development Program Task Force
99 Financial Sector Development Program