Saudi Arabia eases regulation to support SMEs and Entrepreneurs
Saudi Arabia will exempt small and medium enterprises (SMEs) from commerce fees register for three years as the country plans to boost the number of start-ups in the economy. Fees will start in the fourth and fifth year, but at a reduced rate of SAR 500 (USD 133) for entrepreneurs and SAR 200 for entrepreneurs with a capital of less than SAR 375,000 and whose employees do not exceed five in number. This initiative was taken to support and reduce the start-up costs for entrepreneurs and SMEs.
Saudi Arabia has given significant support to SMEs since the onset of the pandemic
Saudi Arabia extended a loan deferral program to help SMEs cope with the impact of the COVID-19 pandemic by three months to the end of September. The program has allowed SMEs to defer SAR 167 billion (USD 45 billion) in payments since the pandemic began in March 2020. The program has since been extended several times to help support economic growth and employment in the private sector, and to maintain financial sector stability.
Additionally, Saudi Arabia’s Social Development Bank allocated SAR 9 billion (USD 2.4 billion) as aid to SMEs. The funds will be used to help 6,000 businesses with financing and a newly created portfolio will focus on companies in the healthcare sector. The Saudi Industrial Development Fund said it provided USD 4.5 billion in support last year, mostly to small businesses, as Saudi Arabia looked to prop up firms hit by the coronavirus pandemic.
These support measures are part of an effort to increase the contribution of SMEs to the economy. Contribution of SMEs to the GDP has surged 45% since Vision 2030 was launched five years ago, according to official figures. During the period from 2016 until 2018, the SMEs’ contribution to the GDP increased from 20% to 29%.
Saudi Arabia has a goal to raise the contribution to 35% of GDP by 2030. Furthermore, the number of SMEs under the Vision 2030 grew from 447,000 five years ago to 614,000 in 2020. In addition, the SMEs’ share of bank loans rose from 2% to 8% in the 2016-2018 period, compared to a target of 11% by 2025. Besides the government has started accelerator programs like Taqqadam in collaboration with universities to encourage entrepreneurship, startups and SMEs. This multi-pronged approach of loans and targeted aid to SMEs can help SMEs recover from the impact of COVID-19 and adapt to the changing situation as the world emerges out of the pandemic.