Small and Medium Enterprises (SMEs)
The Bank’s participation in the SME sector is poised for growth despite the COVID-19 pandemic, particularly in the Kafalah and POS portfolios. Therefore, there were many initiatives that have been considered to support this promising growth as follows:
- Introduction of fast track approvals for amendments requests and new POS/Kafalah requests to expedite the work process while enhancing our customers’ experience
- Introduction of different new products in the pipeline which are designed with less requirements and restrictions to fulfill the customers’ needs, especially the Micro and Small Enterprises
- The creation of a new organizational structure to enhance the workflow by having special teams and Relationship Managers in three promising regions (Qassim, Al Madina and Abha) to serve the SMEs in program based lending (POS Finance)
Impact of Kafalah Program on SME portfolio
The focus on Kafalah SME program has helped to increase the coverage of existing and new SME customers. Consequently, this has reflected positively on the SME portfolio’s growth and the increase in the customer base. Furthermore, POS financing has also significantly increased from SAR 19 Mn. (37 customers) in 2020, to SAR 224 Mn. (276 customers) by December 2021.
Performance of SME portfolio
By the end of December 2021, the outstanding Business Banking portfolio reached SAR 4.1 Bn. including funded and non-funded. Gross Income, during the same period reached SAR 225 Mn.
On the other hand, at the end of 2020, the non-performing loans were SAR 222 Mn. and at the end of Q3 2021 were SAR 221 Mn.
SME Digital Transformation progress in 2021
Digitalization of the Bank’s operations remains an area of key focus. A special team has been assigned to handle the digitalization of the SME customer journey. Weekly meetings between business banking teams and digital product development teams are convened to discuss the design, required functions, and weekly deliverables to ensure the project progresses to meet its assigned deadline.
New products/services introduced during 2021 for the SME customer segment
In the quest to service the SME customer segment with relevant products and new initiatives, the Bank introduced the following measures:
- POS Financing Product: Increased the financing limit from SAR 1 Mn. to SAR 3 Mn.
- POS Financing Product: Increased the financed percentage from 25% of total POS deposits to 37%
- POS Financing Product: The tenure of financing was also increased from 24 months to 36 months
- An agreement with Monsha’at was signed, to finance the franchising of Saudi brands.
In addition, the following products/partnerships are under consideration:
- An agreement with Agriculture Development Fund (ADF) is under review by the ADF team to finance the SMEs work in the agriculture sector
- An Agreement with the Ministry of Health is under review by the Ministry of Health to finance the starts up in the healthcare sector
- Microfinance based on the Current Account movement is under review and to be launched in Q1-2022
- Daman (Performance Bond) for SMEs in contracting sector is in the final stage and to be launched in Q1-2022
Impact of COVID-19 on SME portfolio
The impact of COVID-19 provided an opportunity for the Bank to evaluate its relationship with existing and new SME customers. In light of the findings, the Bank prevent any future defaults on their loan portfolios.
Instead, the Bank offered to restructure the repayment schedules of those badly affected, based on their financial performance, to support their cash flow during this difficult time. Also, Alinma Bank has successfully applied the Deferred Payment Program (DPP) which introduced by SAMA to support SME during the COVID-19 pandemic. The DPP has been applied through multiple rounds, to make sure the SME businesses have started to recover from the impacts of COVID-19.
In addition, Alinma has achieved impressive records in Guaranteed Loan Program, initiated by SAMA in co-operation with the Kafalah program, to guarantee any new or existing SME customer up to 95%. The program has helped the Bank to maintain growth in the SME market during this period.
Overall, the SME sector is receiving great support from the government and semi-government agencies. There are now many programs to support SMEs by providing direct financing or guarantees, for banks and other financial institutions.
