Saudi Arabia’s financial transformation is Vision 2030 success story

Saudi Arabia has undertaken several reforms over the last decade, most of which are the byproduct of Vision 2030, which have transformed the financial sector and businesses, as well as society as a whole.

A key driver of this transformation was the implementation of the Financial Sector Development Program and the emergence of the Saudi Exchange, or Tadawul, as a global market. The FSDP was introduced in 2017 as a part of Saudi Arabia’s Vision 2030 to boost the capital market.

The plan aims to transform the stock exchange into a robust international investment platform. It also aims to improve trading infrastructure, settlement processes, and market capitalization to over $3 trillion.

This has led to increased online platforms, fintech capabilities, and transparency. Tadawul’s inclusion in the MSCI Emerging Markets Index in 2019 further solidified its global position.

Another major reform was starting fintech innovation. Since the launch of the Fintech Saudi initiative in 2018, Saudi Arabia has been a leading fintech hub in the Middle East, fostering innovation and widespread digital payments.

The Saudi Central Bank has facilitated this growth through progressive laws. This includes a regulatory sandbox for supervised testing of advanced technologies, specialist licenses for fintech businesses, and the availability of banking infrastructure and Application Programming Interfaces.

Moving to green finance, Saudi Arabia is focusing on financial sector innovation and sustainability, implementing green financing programs as a part of its Vision 2030 objectives.

Since 2022, the country has promoted environmentally friendly investment and finance green projects through sustainable laws and by issuing green bonds. These proactive initiatives have made Saudi Arabia a key player in the global transition to a more environmentally responsible economic model.

Saudi Arabia has also increased its accessibility and appeal to foreign investors by connecting the market to the global financial system. This strategic policy change has led to a significant increase in foreign capital inflow, indicating global trust in the stability of the Kingdom’s financial system.

When it comes to developing the Saudi debt-financing market, the Kingdom established the Debt Management Office to manage its debt while balancing financial policies and risks.

The DMO was restructured into the independent National Debt Management Center, which collects data, negotiates arrangements, implements hedging measures, manages investor relations for public debt, and ensures good credit ratings.

This specialized body has improved public financial controls and maintained a sound fiscal position, thereby enhancing Saudi Arabia’s financial standing.

Since the launch of Vision 2030, Saudi Arabia has been leading the fintech revolution with over 226 fintech enterprises, thanks to its well-functioning telecommunications sector and heavy investment in infrastructure.

“A key driver of this transformation was the implementation of the Financial Sector Development Program and the emergence of the Saudi Exchange, or Tadawul, as a global market.”

Dr. Yaseen Ghulam

STC Bank, the Saudi Digital Bank, and SARIE are leading the way in consumer digital banking and payment systems. Digital banking helps customers save time, reduce transaction costs, and promotes competition, leading to increased economic activity and growth.

With consumer consent, these facilities allow permitted third-party providers access to financial data, fostering competition and innovation in the financial industry. Digital wallets, smartphone apps, and online banking have become crucial elements of the current Saudi banking experience.

Opening a bank account can be done online, especially beneficial in rural areas. Customers can use banking apps on their phones or computers to register and open an account in minutes. Mobile banking has boosted financial inclusion by providing credit, insurance, and financial services to previously marginalized individuals and regions.

Saudi Arabia’s Vision 2030 and the FSDP aim to boost financing for over 1.3 million small- and medium-sized companies by increasing the banking system’s SME financing ratio to 11 percent by 2025.

This is supported by institutions including Monshaat, Saudi Venture Capital Company, the Esterdad Initiative, and loans facilitated through the Indirect Lending Initiative. The government recommends financial institutions allocate 20 percent of their loan portfolios to the SME industry.

Monshaat’s various schemes, along with the fintech revolution, are also contributing to increased funding for SMEs. The Public Investment Fund is also improving SME funding, with Saudi Aramco’s Taleed program providing over SR3 billion ($798 million).

These funding channels were made possible by government reforms and support for smaller businesses to help improve diversification of the economy, which is the main objective of Vision 2030.

Another important development has been the rise in financial literacy. The Financial Literacy Strategy, a key component of Vision 2030, aims to enhance this aspect in the Kingdom. The Financial Literacy Entity within the FSDP has been instrumental in achieving this goal.

Fintech companies such as Darahim and Fatafeat are working to boost financial literacy. Saudi Arabia’s Ministry of Education has mandated the inclusion of a Financial Knowledge course in school curricula. In addition, Thameen and Smart Investor are awareness initiatives run by the Capital Market Authority.

A report issued in 2023 from the Saudi Central Bank indicates that financial literacy has increased, with 38 percent of adults now understanding basic financial concepts. Future initiatives include removing cultural barriers and providing religious context.

Access to financial institutions, workshops, and mentorship programs is crucial in rural areas. Investing in regional financial literacy materials, using technology for Arabic online resources, and forming partnerships with financial institutions can help overcome barriers.

Collaboration with local institutions, Islamic banks, and experts can also establish customized financial education channels.

• Dr. Yaseen Ghulam is an associate professor of economics and director of research at Al-Yamamah University in Riyadh.