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Saudi Arabia’s FY 2025 Budget – Driving SME Financing & Economic Diversification

March 10, 2025

Saudi Arabia’s fiscal year 2025 budget underscores a strategic push toward economic diversification and private sector empowerment, with small and medium enterprises (SMEs) taking center stage. From increased SME financing allocations and supportive regulations to the rollout of a new Saudi Riyal currency symbol, the Kingdom is aligning financial policy with its Saudi Vision 2030 goals. These measures are designed to enhance SME financing accessibility, foster innovation in fintech, and accelerate non-oil economic growth. The result is a multi-faceted strategy aimed at strengthening Saudi Arabia’s economic resilience and global financial identity.

SME Financing as a Budget Priority

The FY 2025 budget explicitly prioritizes SME growth as a key to diversification. Saudi Arabia continues to allocate funding and launch programs to support SMEs across regions and sectors, in line with Saudi Vision 2030. Notably, the government has established four new special economic zones tailored to regional advantages “to support the local economy and SMEs all over… and to enhance innovation”.

This ensures that entrepreneurship and SME development are fostered nationwide, not just in major cities. The budget also maintains expansionary spending to drive non-oil GDP growth of 4.6% in 2025 (up from 0.8% in 2024) – largely fueled by rising private sector activity.

Empowering the private sector and fostering SME growth is a central theme, as emphasized by Crown Prince Mohammed bin Salman when approving the budget.

To channel funds effectively, Saudi authorities are leveraging specialized institutions. The SME Bank – a development bank launched under MonshaatSA (the SME authority) – has scaled up its lending programs. By H1 2024, SME Bank had financed over SAR 1.2 billion through various schemes, benefiting 918 enterprises. These include an Agency Financing Program, co-financing arrangements, and a Low-Cost Loan Model to make credit more affordable. SME Bank also works in tandem with the Kafalah | كفالة credit guarantee program to de-risk SME lending. In 2024, more than 1,000 businesses used the bank’s new Credit Advisory initiative to find suitable financing, and the Bank’s strategic objectives for 2025 include “increasing funding for SMEs, amplifying their social and economic impact, and establishing the necessary infrastructure for SME financing through digital channels”. Such budget-backed initiatives directly address SME credit needs while ensuring funds are used to maximize economic and social returns.

At the same time, the role of fintech-driven underwriting platforms is growing, helping financial institutions assess SME creditworthiness more efficiently. Abwab.ai is one such solution, leveraging AI-powered underwriting to streamline SME loan approvals. By automating risk assessment and integrating alternative data sources, Abwab.ai enables lenders to make faster, safer, and more accurate credit decisions. This aligns perfectly with the government’s push for digital transformation in SME financing. With banks increasingly adopting AI-driven tools, such platforms are filling critical gaps in financial accessibility while reducing inefficiencies in the lending process.

Government Policies Fueling Diversification & Innovation

Broader government policies complement the budget’s SME focus by nurturing an ecosystem where new enterprises can thrive. Under Saudi Vision 2030, Saudi Arabia seeks to raise the SME sector’s GDP contribution from 20% (in 2016) to 35% by 2030. Progress is evident –SMEs now contribute around 30% of GDP as of 2024, reflecting rapid growth in entrepreneurship. The total number of SMEs has surpassed 1.3 million nationwide, after growing 3.1% in the last quarter of 2023 alone. Major enablers like MonshaatSA offer an array of programs (incubators, accelerators, funding platforms, and fee reimbursement schemes) to reduce barriers for startups and smaller firms. These efforts are paying off – in Q4 2024, over 160,000 new commercial registrations were issued, indicating a dynamic entrepreneurial landscape. Sectors from e-commerce to cultural tourism are burgeoning with SME activity, aligned with Saudi Arabia’s push to develop new industries.

Critically, policymakers recognize that SMEs are catalysts for innovation and sustainable growth. Rakan Alsheikh, Deputy Minister for Economic Planning, highlighted that

“At the heart of Saudi Arabia’s transformation lies our vibrant SME sector, which serves as a powerful driver of the economy”.

These businesses are pioneering solutions in fields like fintech, green technology, and creative industries, accelerating diversification. For example, Saudi SMEs have led the Kingdom to claim 54% of all venture capital investment in the MENA region in H1 2024, largely through the SVC– a government-backed VC fund. With hefty public and private investment (the Public Investment Fund (PIF) and other arms fueling mega-projects and new sectors), the ecosystem is primed for SMEs to expand into emerging industries beyond oil. The FY 2025 budget’s expansionary stance – despite a projected SR101 billion deficit – reflects confidence that empowering SMEs and the private sector will yield long-term sustainable growth.

Financial Sector Reforms Boosting SME Lending

A supportive financial sector is vital for SMEs to access the capital they need. Saudi regulators have introduced targeted reforms and regulations to improve SME financing in recent years, and these efforts continue into 2025:

  • Financial Sector Development Program (FSDP): Under Vision 2030’s FSDP, banks were encouraged to significantly increase lending to SMEs. The goal is to raise SME loans from a mere 2% of total bank credit in 2016 to 20% by 2030. Reforms are on track – by the end of 2023, SME lending had already grown to 8.3% of bank loans, and the volume of SME credit reached ~SAR 329 billion by Q3 2024 (a 22.6% year-on-year rise). This rapid progress stems from policy measures like mandated SME lending targets, public loan guarantees, and interest rate subsidies that make SME finance more attractive to lenders.

  • Credit Guarantee and Indirect Lending: Programs such as Kafalah | كفالة (guaranteeing up to 80% of loan principal for qualifying SMEs) have reduced risk for banks and stimulated credit growth. By guaranteeing SAR 67.7 billion in loans in 2021 alone, Kafalah has boosted lender appetite. Meanwhile, Monsha’at’s Indirect Lending Initiative channels government funds through partner financial institutions at low cost – over SAR 5.2 billion had been disbursed via this platform by 2022, and it continues to expand. Such initiatives effectively bridge gaps, allowing more SMEs to secure financing on reasonable terms.

  • Open Banking and Fintech Regulations: The Saudi Central Bank – SAMA has embraced fintech as a means to widen financial inclusion. SAMA rolled out an Open Banking Framework in 2022, which compels banks to share customer data securely with licensed fintech firms. This enables innovative services like alternative SME credit scoring, accounting integration, and lending marketplaces. Regulators have also created fintech sandboxes and new licensing categories – for peer-to-peer lending, equity crowdfunding, digital banks, and payments – encouraging non-bank lenders to enter the SME finance space. The result is a burgeoning fintech sector with 224 active fintech companies as of mid-2024, surpassing the FSDP’s interim targets. These startups and platforms (e.g. Funding Gate, Lendo, Manafa) bring fresh competition and digitally-driven lending models that streamline SME financing.

  • Digital Lending Platforms: Saudi Arabia is harnessing technology to cut red tape in lending. Monsha’at’s Funding Gate is an online aggregation platform that connects SMEs with banks and finance companies. By automating loan inquiries and matching, it slashed average funding turnaround from 86 days to just 7 days. Funding Gate saw exponential demand – annual loan volumes jumped from SAR 1.1 billion in 2020 to SAR 11 billion in 2021, involving 45 participating lenders Building on this success, the SME Bank recently launched an agency model for debt crowdfunding, where the bank partners with P2P platforms to fund SMEs. The second phase of this program in 2025 will provide SAR 240 million via platforms like manafa | منافع and Lendo | ليندو, focusing on startups and e-commerce businesses. By “enhancing digital integration,” the aim is to “provide faster, more efficient financial solutions” and reduce bureaucratic hurdles for SME borrowers

According to the Arab News:

"SME financing is increasingly driven by digital platforms and fintech innovation in Saudi Arabia. Online lending portals and crowdfunding partnerships are speeding up loan approvals for small businesses, reflecting a broader fintech boom."

Collectively, these regulatory and technological measures are improving access to finance for SMEs. Banks have stronger incentives (and state support) to lend to smaller firms, and alternative financiers are scaling up to serve market segments that banks might overlook. Osama AlRaee , CEO of Saudi crowdfunding platform Lendo | ليندو, noted a “massive” SME financing gap of over SAR 300 billion remains to be filled. But he also highlighted the opportunity: global institutions are now investing to bridge this gap (e.g. Lendo | ليندو’s recent $690 million facility from J.P. Morgan to fund Saudi SMEs) and the SME finance market could grow several-fold in the coming years. With annual SME credit growth exceeding 17% as of 2023, Saudi Arabia is steadily closing the gap and steering more capital into entrepreneurial ventures.

The New Riyal Symbol & Fintech Adoption

Saudi Arabia’s newly launched Riyal symbol (رمز الريال السعودي) reflects a blend of tradition and modernity. Officials emphasize that this branding move will boost the currency’s global recognition and trust, much like the iconic symbols for the dollar or euro.

A notable development in early 2025 with implications for the financial sector is the introduction of the new official symbol for the Saudi Riyal (﷼). Approved by King Salman in February 2025, this currency symbol is a bold step in financial branding and modernization. The design ingeniously blends Arabic calligraphic elements to represent the letters “Riyal” (ريال) in stylized form. Beyond aesthetics, the new symbol carries practical and strategic significance for digital transactions and fintech:

  • Global Recognition: Having a dedicated symbol (like $, €, ¥ for the dollar, euro, yen) makes the currency instantly identifiable. “Just as the dollar, euro, and yen are instantly recognizable, a unique symbol for the Saudi riyal…could help it stand out in financial documents, trading platforms, and media coverage,” notes Youssef Saidi, an economic researcher.

  • Strengthening Financial Identity: The Saudi Central Bank – SAMA Governor hailed the symbol as reinforcing Saudi Arabia’s financial identity “both locally and globally”, and as a source of national pride. The symbol’s integration is being rolled out across banking systems, payment interfaces, and commercial applications in a coordinated manner. A strong currency symbol telegraphs stability. In other words, it complements the Kingdom’s narrative of an evolving, diversified economy by giving the Riyal a modern emblem.

  • Digital and Fintech Integration: The timing of the Riyal symbol comes as Saudi Arabia’s payments ecosystem rapidly digitalizes. By 2023, cashless transactions formed 70% of all point-of-sale payments, achieving the Vision 2030 target ahead of schedule. A unified currency symbol will further ease digital processing of transactions and accounting. Fintech apps, e-commerce sites, and even crypto platforms can incorporate the symbol for a consistent user experience. Al-Sayed points out that in an era of digital payments and potential future cryptocurrencies, “distinct monetary symbols (are) increasingly important” to denote credible national currencies. The Riyal symbol will also feature on future banknotes and perhaps any central bank digital currency (CBDC) that Saudi Arabia might pursue, cementing its role in both conventional and cutting-edge financial channels. Importantly, using Arabic script in the symbol underscores that embracing innovation does not mean abandoning cultural identity– a message that resonates with both the public and global audiences.

“A strong, well-defined riyal symbol reinforces these efforts, signaling economic stability and modernization to global investors,” explains Dr. Tamer Alsayed, CPA, FCMA, CGMA, CFO at the FII Institute .

In summary, the new Riyal symbol is more than a design tweak; it is part of Saudi Arabia’s strategy to modernize its financial infrastructure and image, hand-in-hand with the fintech boom. It creates a cohesive brand for the currency that aligns with the Kingdom’s digital transformation. As one financial analyst observed, this “visionary maneuver” declares that Saudi Arabia’s financial identity is here to stay, firmly placing the Riyal among globally recognized currencies.

Impact on SME Financing Accessibility & Economic Growth

Bringing together the threads of budget policy, regulatory reform, and financial innovation, Saudi Arabia is creating an environment where SMEs have unprecedented access to capital and opportunities to scale. The synergy between these elements can be seen in several ways:

  • Easier Access to Funding: Government-backed funds and guarantees lower the hurdles for SMEs to secure loans, while fintech platforms speed up the process. An SME owner today can apply via a digital portal and potentially receive funding within days, a dramatic improvement over the past. More importantly, a diverse range of financing options is now available – from conventional bank loans, to crowdfunding, venture capital, and soon even specialized fintech lending products for sectors like agriculture or education. This plurality means SMEs aren’t solely reliant on big banks; competition drives financiers to offer better terms and innovative solutions. The outcome is a more inclusive financial system where even small startups can find the right financing fit.

  • Growth of Non-Oil Sectors: By empowering SMEs, Saudi Arabia directly fuels non-oil economic growth. Many SMEs operate in emerging industries (tech, tourism, entertainment, logistics) that are crucial for diversification. With greater financing, these firms can invest in expansion, hire more staff, and increase output. The government’s expansionary spending – in infrastructure, mega-projects, and programs – further creates business opportunities for SMEs as contractors and suppliers. It’s a virtuous cycle: budget spending stimulates projects; SMEs capture new business; SMEs grow and contribute more to GDP and employment. Already, non-oil activities comprise about half of GDP and Saudi Arabia’s global competitiveness has improved, aided by the innovation and agility of its SME sector. This momentum is reflected in rising GDP forecasts (around 5%+ annual growth through 2025) and in international credit rating upgrades citing the diversified growth base.

  • Financial Stability and Investor Confidence: broader lending base to SMEs also contributes to financial stability and sustainable credit growth. Banks diversifying into SME lending can reduce concentration risk in their portfolios. The introduction of the Riyal symbol and the move toward a cashless society enhance transparency and trust in the financial system, which benefits SMEs as well. Foreign investors and lenders are increasingly attracted to Saudi Arabia’s SME scene – evidenced by large VC inflows (Saudi startups attracted $750 million across 178 deals in 2024, the highest in MENA and partnerships like the JPMorgan-Lendo deal. All these signal confidence in the country’s economic direction. As one senior economist put it, “a strong riyal symbol is a strategic move because it boosts global confidence in Saudi Arabia’s economy”, reinforcing the sense of stability that investors seek. That confidence can translate into lower funding costs and more capital for Saudi businesses of all sizes.

  • Innovation and Productivity: The focus on SMEs and fintech fosters a culture of innovation. Competition from fintech startups prompts traditional banks to modernize their SME services (for example, via instant loans or better online banking for businesses). Meanwhile, SMEs often bring new technologies and business models to market. The government’s policies (such as SME digital platforms, open banking) essentially lay the pipes for innovation to flow. Over time, this should improve productivity across the economy – from a more efficient payments system to a more dynamic startup ecosystem solving local problems. The positive social impact is significant too: SMEs are major job creators, and easier business financing means more potential for employment, including for youth and women entrepreneurs entering the market.

In the words of one policymaker, Saudi Arabia is “transforming into a land of future opportunities” where empowered SMEs play a central role. The FY 2025 budget, coupled with financial sector modernization and the new currency symbol, all reinforce a clear message:the Kingdom is committed to a vibrant, digitally-enabled SME economy as the foundation of its post-oil future. By aligning fiscal resources, regulatory frameworks, and symbolic gestures, Saudi Arabia is significantly improving SME financing accessibility – and in turn, driving robust economic growth that is more sustainable and inclusive.

Conclusion

Saudi Arabia’s holistic approach – from budget allocations to branding the Riyal – creates fertile ground for SMEs to flourish. Financial policymakers can take note of how coordinated reforms are reducing the SME finance gap, while fintech leaders see a supportive climate to innovate in services for entrepreneurs. SME owners are already benefitting from faster loans and more avenues to raise capital, and lenders find new partnerships and markets among Saudi’s expanding SME sector. The Kingdom still faces a journey to reach its ambitious 2030 targets, but the trajectory is unmistakably positive. With SMEs empowered and proudly carrying the Saudi economy’s future (now under a globally recognized Riyal symbol), the nation is poised for a new era of diversified growth. As Dr. Tamer Alsayed, CPA, FCMA, CGMA observed, “this is not just a branding exercise — it’s a step toward redefining Saudi Arabia’s financial identity”, one that balances heritage with progress and anchors the country’s economic aspirations in a thriving SME ecosystem.

References:

Saudi Ministry of Finance, Saudi Arabia – FY’2025 Budget Statement & Economic Report

Vision 2030 & SME Development Reports

Saudi Arabian Monetary Authority (SAMA) Reports & Financial Sector Regulations

Fintech Saudi | فنتك السعودية Reports – SME Financial Inclusion & Fintech Growth in KSA

Saudi Capital Market Authority (CMA) Reports

Kafalah Credit Guarantee Program

Deloitte & PwC Reports on MENA SME Lending & Fintech Evolution

GASTAT (General Authority for Statistics) Reports