also recently entered into bank assurance whereby they have entered into joint-venture agreements with some of the leading insurance companies to provide distribution of jointly-labeled insurance products through their branch networks. Also, recently the Saudi
have licensed two leasing leasing companies and
companies which are
joint ventures including major the new Capital Market and
Laws, Saudi banks will compete with non-bank of these services. This will lead to rapid growth and
financial institutions in the expansion of these sectors.
Another important area of growth for Saudi banks is non-interest (Islamic) banking services, the demand for which has grown rapidly in recent years and now account for over 17% of the total assets of the Saudi banking system.
Foreign Banks’ Participation.
Saudi Arabian financial system has always been
open to foreign presence. The government has trade, investment and economic relations and
encouraged this to promote competition,
already has considerable foreign investor presence as eight of the substantial foreign ownership. Many of the foreign partners in Saudi
eleven banks have joint venture banks
have technical management agreements. number of GCC banking institutions, as
In past three years, Saudi Arabia has licensed a a result of the decision of the GCC Summit to
been developed for assessing the application of new banks both from GCC and this connection, Gulf International Bank of Bahrain has been granted a September 2000 to open a branch in Saudi Arabia. This was followed by grant
outside. In license in of a branch
license to the Emirates Bank International, the National Bank of Kuwait Bank of Bahrain. These banks are likely to commence operations Applications from other foreign banks are also being considered.
the National near future.
Other Infrastructure Developments. Some of the other institutional developments with implications for the future of the financial sector which are worthy of note are as follows:
The Saudi Credit Bureau: since the 1970s SAMA had recognized the need for a suitable infrastructure for the provision of customer related information to support the credit decisions by banks and financial institutions. In this regard SAMA has established and operated a Saudi Credit Information Centre for major banking customers, in 1981. This permitted Saudi banks to collect and
on their major customers and to be aware Following banking problems, in 1987
of such customers’ SAMA permitted
banks to share This exchange
and exchange information on of information enabled banks
their large delinquent customers. to collectively exert pressure on
such customers for banks to develop
the benefit of all a central system
banks. Also to maintain
in 1994, SAMA permitted information on delinquent
borrowers in the retail sector. borrowers to obtain credit from information systems are being
This system was helpful in preventing such more than one bank. In 2003, these credit further supplemented by a classical credit