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Consumer Lending in Saudi Arabia

Saudi Arabia Consumer Lending Market: New market research released


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2014-04-10 14:21:02 - Consumer Lending in Saudi Arabia - a new market research report on companiesandmarkets.com

In 2013 the Saudi Arabian economy is estimated to achieve a strong growth rate in light of high oil prices, which boosted government spending. The over-performance of the local economy enhanced consumers´ and businesses´ confidence. This in turn led to further expansion of consumer and investment spending, creating demand for consumer and corporate credit.

Demand for housing is growing more than ever in the Kingdom due to rapid population growth. The larger cities are expected to grow faster in terms of population. Such high and increasing demand for housing is creating a problem for both the government and the lending establishments in the Kingdom. In 2011 the Saudi Arabian Government issued its strategy to solve the housing problem in the country.

 

 

The decisions made include the allocation of around SAR305 billion to ease the burden of high property prices and housing market imbalances, of which SAR250 billion will be managed by the newly established ministry, the Ministry of Housing (MoH), for the construction of 500,000 housing units across the country.

Lenders in Saudi Arabia engage in major competition to attract customers in all categories of the consumer credit market, especially in personal lending. Banks provide customers with lending programmes, including offers such as the option of refinancing a loan after a certain period of time. Local banks remain dominant in the consumer credit market in Saudi Arabia.

Traditionally, Saudi banks classified their consumer lending products in three main categories: personal loans, auto loans, and home purchase loans. Recently the market has witnessed more product branding, such as educational loans. Over the forecast period product branding is expected to be increasingly used as a competitive tool that helps attract more customers, as branding enables customers to recognise their exact needs.

Over the forecast period economic conditions are expected to remain favourable, with expansionary fiscal policy projected in light of the upward movement of oil prices, which includes launches of additional infrastructure projects and economic cities. Banks´ asset quality is expected to improve, with an increasing non-performing loans coverage ratio. Furthermore, liquidity levels and the low interest rate environment, as well as profit maximisation, are expected to stimulate consumer credit lending. Demand is also expected to expand further over the forecast period in light of increased confidence in the local economy, which will boost spending levels.

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Mike King
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