AI & Financial Inclusion: Democratizing Credit for Micro & Small Businesses in Saudi Arabia

Access to finance remains a cornerstone of economic development, yet for micro and small-medium businesses (MSMEs), it’s often a steep uphill climb. According to the MonshaatSA, these businesses form the backbone of Saudi Arabia’s economy, accounting for 99.5% of all businesses and employing 63% of the private sector workforce. Despite their outsized role, a significant funding gap persists, one that AI is uniquely positioned to close.

In a financial landscape traditionally dominated by rigid credit assessments and limited access to data, the Kingdom’s Vision 2030 blueprint for economic diversification has opened doors to innovation. AI, with its ability to analyze vast, diverse datasets, is now redefining what financial inclusion can look like for MSMEs.

The Reality of Underserved Businesses…

For decades, micro and small businesses have struggled to access the credit they need to grow. Traditional lending models rely heavily on collateral-based assessments and rigid credit scoring systems. According to the The World Bank, over 40% of MSEs in emerging markets face financial exclusion. In Saudi Arabia, despite government initiatives such as the SME Bank, only 27% of SME loans go to micro and small businesses, even though they represent the majority of the market.

These figures highlight a stark reality: most MSMEs lack the financial records or collateral needed to meet conventional lending criteria. This exclusion stifles their ability to expand, innovate, and contribute to the broader economy.

The World Economic Forum even highlights that 50% of global SMEs lack adequate access to finance, but predicts that AI could reduce these barriers by over 30% in the next decade.

How AI is Changing the Game?

AI offers a revolutionary approach to lending by replacing conventional, static credit models with dynamic, data-driven assessments. Here’s how AI is reshaping the lending landscape:

1. Alternative Data Utilization: AI leverages non-traditional data sources: such as transactional histories, utility payments, and supply chain activity, to build a comprehensive profile of an applicant’s creditworthiness. For MSMEs in Saudi Arabia, where formal credit histories are often limited, this is a game-changer.

2. Speed and Efficiency: AI-powered platforms can process loan applications in minutes rather than weeks. This reduces operational costs for lenders and ensures that MSMEs gain quick access to the funds they need to seize growth opportunities.

3. Risk Management: Using machine learning algorithms, AI predicts default risks with precision, reducing credit losses. Saudi fintech firms are already integrating AI tools to reduce loan approval times by 40%, helping lenders extend their reach to underserved segments.

How We’re Solving the Problem:

At Abwab.ai, we’ve recognized the challenges MSMEs face in securing financing and decided to act. We’re leveraging AI to address the core issues in SME lending—lack of data, inefficiency, and risk. Here’s how:

👉 Smarter Credit Assessments: Our AI-powered platform evaluates credit risk using real-time data from diverse sources, including financial transactions, industry benchmarks, and behavioral data. This approach allows us to assess businesses overlooked by traditional methods.

👉 Faster Loan Approvals: We’ve streamlined the underwriting process, cutting loan approval times by up to 50%. This means MSMEs can access the funds they need without the typical delays that hinder growth.

👉 Reducing Credit Losses: By leveraging advanced machine learning models, we’re helping lenders reduce credit losses by up to 20%.This not only benefits financial institutions but also creates more confidence in lending to smaller enterprises.

👉 Fraud Detection: Fraud remains a significant concern in lending. We’re combating this with AI-driven anomaly detection algorithms, which identify fraudulent patterns and protect both lenders and borrowers.

A Saudi Perspective: The AI-Driven Lending Revolution.

Saudi Arabia is at the forefront of AI adoption in financial services, fueled by investments from the Public Investment Fund (PIF) and initiatives like Fintech Saudi | فنتك السعودية and Saudi Central Bank – SAMA. The local SME sector presents a $67 billion financing opportunity, yet most of this remains untapped for micro and small businesses.

We’re committed to being part of the solution. At Abwab.ai, we’re working to ensure that the untapped potential of Saudi Arabia’s micro and small businesses is unlocked, fostering an inclusive financial system that benefits all.

Expanding access to credit for MSMEs doesn’t just benefit businesses, it drives broader economic growth. According to a report by McKinsey & Company, closing the SME financing gap in the Middle East could add $1 trillion to GDP by 2025. For Saudi Arabia, where the government aims to increase SME GDP contribution to 35% by 2030, the stakes are even higher.

H.E. Khalid bin Abdulaziz Al-Falih, Saudi Arabia’s Minister of Investment (Ministry of Investment):

The OECD - OCDE predicts that integrating AI into lending could expand credit access to over 60 million underserved MSMEs globally, a vision that companies like Abwab.ai are bringing closer to reality in Saudi Arabia.

Addressing Challenges: Responsible AI in Lending.

While the benefits of AI in lending are clear, its adoption must be balanced with responsible practices. In Saudi Arabia, where data privacy laws like PDPL (Personal Data Protection Law) are taking shape, financial institutions must ensure compliance to maintain public trust.

At Abwab.ai, we’re committed to responsible AI. Our models are designed to be:

 ✔️ Transparent: We ensure that lenders understand how decisions are made.

 ✔️  Fair: By using unbiased datasets, we’re making lending more inclusive.

 ✔️  Compliant: Our platform adheres to local regulatory frameworks, fostering trust in AI-driven lending.

The Future is Inclusive... and It’s Powered by AI.

Saudi Arabia’s strides in AI adoption signal a future where lending becomes more inclusive, efficient, and impactful. At Abwab.ai, we’re driving this change. By democratizing access to credit, we’re empowering micro and small businesses to unlock their true potential, fostering innovation, creating jobs, and contributing to the Kingdom’s Vision 2030 goals.

AI isn’t just reshaping lending, it’s redefining opportunity. We’re proud to be at the forefront of this transformation, helping to create a more equitable and prosperous financial ecosystem.