One of the most significant—and, in fact, fundamental—pillars of the national economy is the financial sector. The expansion of this sector is a sign of the state’s overall prosperity and economic growth. This industry is the main engine that propels the economy and all projects, operations, and economic activity.
It provides the state liquidity, which other sectors need to convert from capital or debt to profit. To support the goals of Vision 2030 in the development and expansion of this sector, Saudi Arabia has established specific goals for the Financial Sector Development Programme. Have we achieved this goal?
Issues in the Financial Sector Since the Vision’s Launch
The Financial Sector Development Programme’s reliance on bank financing rather than debt instruments was one of its major challenges, particularly in 2022. As a result, direct bank loans took precedence over companies “in need of financing,” issuing debt instruments for public purchase. At the time, debt instruments accounted for just 4% of the Kingdom’s financing market.
The second issue was the market’s high concentration, which meant that only a few large companies held the majority of the market capitalisation traded, leaving the other companies on the market’s periphery in terms of liquidity and trading range influence.
A third issue that surfaced was the lack of institutional investment. For a while, the financial sector was the focus of this structural issue that hampered it. The greatest obstacle, though, was the existence of gaps in financial inclusion. This meant that the proportion of services offered by banks in the Kingdom differed depending on the population’s size and its demographic characteristics, such as women or rural areas.
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Development Programme Foundation & Goal
In 2018, the Kingdom initiated the Financial Development Programme as a calculated move to improve the power and effectiveness of its financial institutions. In addition, it seeks to make the Kingdom a global financial hub and strengthen the Saudi financial market generally and locally in particular.
Moreover, this programme covers several sub-sectors, including debt, stock markets, insurance, and banking. The Capital Market Authority, the Saudi Central Bank, and other active financial sector regulatory and legislative bodies collaborate with it to manage it. Interaction and integration between these organisations are necessary to maintain the nation’s financial stability and encourage sustainable growth.
The programme’s goals include attaining the highest international rankings, strengthening the financial sector’s competitiveness, and solidifying Saudi Arabia’s position in the world. Maintaining the Kingdom’s push for financial digitisation, the programme is recognised for having licensed three local digital banks and established the FinTech Strategy as a primary focus for the industry’s growth.
Likewise, this programme backed the founding of the Financial Academy, which aims to train national cadres and give them the authority to lead and grow the nation’s financial sector, to shape the financial sector and its future leadership.
The annual report for 2024, which highlights the programme’s accomplishments in the previous year and lays out its future objectives within the framework of Saudi Vision 2030, was released in Saudi Arabia on July 13. Besides, the programme’s projects and initiatives to support economic growth and improve the financial sector’s development are highlighted in the report.
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Growth in Licensed Financial Technology Companies
In his remarks at the report’s release, Mohammed bin Abdullah Al-Jadaan, the Minister of Finance and Chairman of the Financial Sector Development Programme Committee, highlighted: “With its successful contribution to creating an economic future that solidifies the Kingdom’s regional and global standing and reflects the level of development observed by all state sectors, the development programme continues its journey of success and accomplishments within the framework of Saudi Vision 2030 programmes.”
He added that during the previous year, the programme had improved the contribution of financial technology to the growth of the financial industry. One of its accomplishments was that by the end of 2024, there were 261 financial technology businesses with licences. By approving the introduction of “D360 Bank” transactions, the Saudi Central Bank further reinforced the digital payments system, and by 2024, electronic payments accounted for 79% of all individual payments.
Through the creation of rules and regulations, the provision of a business-friendly environment, and the approval of the listing of 44 companies—bringing the total to 353 by the end of 2024—the Minister underlined the Saudi financial market’s ongoing momentum.
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Progress Made by the Development Programme
The value of foreign investor ownership in the Saudi market increased by 353%, from SAR 110 billion in 2016 to SAR 498 billion by 2024. This illustrates the market’s appeal to international investors and their faith in Saudi Arabia’s efforts to implement financial and economic reforms.
In turn, the market capitalisation as a percentage of GDP (apart from Aramco) increased from 67% in 2019 to 87% in 2024, reaching the Vision 2030 goal of 80.8%. This growth demonstrates the financial market’s depth, scope, and capacity to take on new investments.
Corporately, the number of companies listed on the financial market increased from 205 in 2019 to 353 in 2024. This growth demonstrates how eager businesses are to go public, which increases the number of investors, boosts investment efficiency, and gives businesses access to funding, all of which raise the private sector’s share of the GDP.
The assets of commercial banks have increased from SAR 2.6 trillion in 2019 to SAR 4.5 trillion in 2024, putting them in a position to meet the goals of the Vision.
Ultimately, the financial sector’s expanding size enhances its capacity to finance projects, enabling it to effectively support megaprojects. As a result, the Saudi market will become a more global and alluring place to invest, and the nation’s economy will be more diverse and better off.
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