Financial Sector Development Program

Quarterly Newsletter Q4 2019

Key Highlights: Budget Deficit in Q4 2019, GDP grows by 0.3% in 2019
Q4 2019 Budget Highlights 2019 GDP Growth (%)*
• Saudi Arabia recorded a budget deficit of SAR 94.7bn in Q4 • Real GDP grew 0.3% in 2019, down from 2.4% expansion
2019, compared to a deficit of SAR 124.9 bn in Q4 2018. recorded in 2018.
• Total revenue decreased by 12% YoY to SAR 213.5bn in Q4 • The drop in GDP was driven by the oil sector, which shrinked
2019 from SAR 242.5bn in the same period last year, where 3.6%, while the non-oil sector recorded a 3.3% growth in
oil revenue declined 26% YoY to SAR 118.6bn, whereas non- 2019(it’s fastest rate since 2014).
oil revenue surged 14% YoY to SAR 94.9bn. Revenues from • The non-oil sector accounted for 57.9% of total GDP in 2019,
‘Taxes on Goods and Services’ witnessed a 27% YoY growth compared to 56.2% 2018 and 56.3% in 2017.
to SAR 40.2bn. • The Ministry of Finance in its FY 2020 Budget Statement has
• Total expenditure declined 16% YoY to SAR 308.3bn in Q4 estimated the real GDP annual growth of 2.3% for FY 2020.
2019.
• Public debt increased to SAR 677.9bn by the end of Q4 2019
from 655.6bn in Q3 2019. Real GDP YoY (%)
0.045
Budget Deficit/Surplus (SAR bn) 0.03
Q4'19*
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
Q3'18
Q4'18
Q1'19
Q2'19
Q3'19

0.015
50
0
20
-10 -0.015
-40 2014 2015 2016 2017 2018 2019
-70
-100
* Based on Preliminary data
-130

SAMA Exceeds Financial Sector Development Target on PMI Index

Electronic Payments in a Head of its Foreseen Date 2020 The Saudi Arabia Purchasing Managers’ Index (PMI) slipped to
(SAMA revealed that the rate of electronic payments for the retail 56.9 in December 2019 (its lowest reading in five months) from
sector - Individual Retail Payments by the end of July 2019, 58.3 in November 2019, weighed by slower output and new
amounted more than 36% of all payments available, including orders. A reading above 50 indicates expansion; conversely, a
cash in the Kingdom, exceeding the target percentage of the reading below 50 indicates contraction.
financial sector development program. The program stipulates PMI
that the share of non-cash transactions should be increased by 28 59
% by 2020. 57
55
This achievement is based on SAMA's strategy for payment 53
systems and the Financial Sector Development Program, which 51
aims to enhance electronic payment and reduce cash handling to
Aug-16
Dec-15

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Aug-19
Apr-16

Apr-17

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Dec-18
Apr-19

Dec-19

reach 70 percent of total payments in the Kingdom by 2030, for its

many positive effects. These include providing customers with an
excellent experience in facilitating payment processes, reducing
cash transaction costs on the local economy, enhancing
transparency in transactions, and direct impact on the efficiency of Consumer Price Index (CPI)
the national economy. The reduction of cash transactions is one of The CPI increased 0.2% YoY in December 2019 after being in
the most important strategic objectives that SAMA has been negative territory for eleven consecutive months. Restaurants &
working on during the past period through the completion of Hotels, Education and Food & Beverages saw 2.6%, 2.3% and 2.2%
several initiatives, projects and investments in the digital increase, respectively; while Housing, water, electricity, gas and
payments sector in line with the objectives of the financial sector other fuels declined 3.7% in December.
development program.
Consumer Price Index (CPI - YoY %)
3.0%
SAMA clarified that within the framework of the importance
1.5%
of monitoring and measuring the performance of the payment
systems strategy, it recently conducted a detailed and 0.0%
comprehensive study to review and develop indicators to measure -1.5%
the percentage of e-payment transactions of the total payments in -3.0%
the Kingdom, and included payment methods currently used in
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Aug-17

Aug-18

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Dec-15
Apr-16

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Dec-19

the individual sectors in accordance with international practices,

in addition to Government and business payments sectors.

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Macroeconomic and Financial Market
Macroeconomic Review
Points of Sale Transactions Money Supply (M3) and Bank Deposit Growth (%)
POS transactions rose 25.1% YoY to SAR 27.9bn in December 2019 Money supply (M3) increased by 7.1% YoY in December 2019.
from SAR 22.3bn in December 2018. As the total amounts of POS Additionally, M1 grew by 5.5%, while Time and Savings deposits
operations reached SAR 78.9bn in Q4 2019 (up 28.3% YoY and increased considerably by 13.2% on YoY basis. When total bank
13.2% QoQ). deposits rose by 7.3% YoY.
POS Transactions (SAR bn) Money Supply and Bank Deposit Growth
30.0 8.0%
6.0%
26.0 4.0%
22.0 2.0%
0.0%
18.0 -2.0%
14.0 -4.0%

Dec-15

Aug-16
Dec-16

Aug-17
Dec-17

Aug-18
Dec-18

Aug-19
Dec-19
Apr-16

Apr-17

Apr-18

Apr-19
10.0
Dec-15

Aug-16

Aug-17

Aug-18

Aug-19
Apr-16

Dec-16
Apr-17

Dec-17
Apr-18

Dec-18
Apr-19

Dec-19
Bank Deposit (YoY) Money Supply (YoY)

Credit Growth (%)* Non-performing Loans as Portion of Total Loans (NPL ratio)
Bank credit (public and private) grew 7.6% YoY in December 2019 NPL ratio remained stable for the third successive quarter at 1.9%
and 3.4% on QoQ basis. Public sector credit increased by 14.7% in Q3 2019 (latest data available) compared to Q2 2019.
YoY and 10.3% on QoQ basis. Bank credit to the private sector rose
7.3% YoY in December and 3.2% on QoQ basis.
Credit Growth (YoY) (public versus private) NPL to Total Loans (ratio)
2.0%
50.0% 15.0%
1.8%
30.0% 10.0%
1.6%
10.0% 5.0%
1.4%
-10.0% 0.0%
1.2%
-30.0% -5.0%
1.0%
Aug-18
Aug-16

Aug-17
Dec-15

Dec-17

Aug-19
Apr-16

Dec-16
Apr-17

Apr-18

Dec-18
Apr-19

Dec-19

Q3'15

Q1'16

Q3'16

Q1'17

Q3'17

Q1'18

Q3'18

Q1'19

Q3'19
Public Sector (%) (LHS) Private Sector (%) (RHS)
*Credit to public sector does not include Gov’t & Quasi-Gov’t bonds

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Financial Market Overview
Tadawul and Equity Market Capitalization Foreign Investor Ownership
The Tadawul Index (TASI) was the best performer among GCC Foreign investors holding value increased by 16.0% the end of
equity indices in December 2019. It rose by 6.7% MoM and 7.2% on December 2019 to SAR 198.0bn compared to SAR 170.6bn in
YTD basis. TASI’s equity market capitalization surged to SAR November 2019. Foreign investor ownership in Saudi stocks
9,025bn in December2019 from SAR 1,844bn in November 2019, (excluding Aramco) increased from 8.6% in Q3 2019 to 9.3% by
led by Saudi Aramco listing during the month. the end of Q4 2019. With the inclusion of Aramco shares foreign
investor holding represent 2.2% due to the increase of the market
value.
TASI: Equity Market Capitalization Foreign Investor Ownership (%)
9,100 9,500 10.0
7,100 8,500 8.0

5,100 7,500 6.0

3,100 6,500 4.0

2.0
1,100 5,500

Oct-16

Oct-17

Sep-18

Sep-19
Apr-16

Apr-17

Apr-18

Dec-18

Dec-19
Mar-19
Jun-18
Jan-16

Jul-16

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Jul-17

Jan-18

Jun-19
Aug-16

Aug-17

Aug-18

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Apr-16

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Apr-17

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Dec-19

Equity Market Cap (SAR bn) - LHS TASI Index - RHS

Institutional Investors’ Share in Value Traded Market Concentration of Top 10 Companies

Institutional investors’ share in the total value traded declined in Q4 The market capitalization of the top 10 companies on the
2019 to a quarterly average of 35.96%, compared to 47.8% in Q3 Tadawul increased significantly to 90.8% by the end of December
2019. 2019 with the listing of Saudi Aramco during the month. By the
end of Q3 2019, the concentration stood at 61.4%.

Market Cap of Top 10 Companies (%)

Institutional Investors' Share of Value Traded
100%
50.0%
90%
40.0% 80%
30.0% 70%
60%
20.0%
50%
10.0%
Mar-16

Sep-16
Dec-16
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Sep-17
Dec-17
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Sep-18
Dec-18
Mar-19

Sep-19
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Jun-16

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Jun-19
Q4'15

Q2'16

Q4'16

Q2'17

Q4'17

Q2'18

Q4'18

Q2'19

Q4'19

Market Cap of Top 10 Companies (%)

Institutional Investors' Share of Value Traded

Assets Under Management (% of GDP)

Assets under management (AUM) as a percentage of nominal GDP
increased to 16.9% in Q4 2019 from 16.4% in Q3 2019. AUM rose
10.0% on YoY basis.

AUM as Proportion of Nominal GDP

18.0%
16.0%
14.0%
12.0%
10.0%
Q4'18
Q4'15

Q2'16

Q4'16

Q2'17

Q4'17

Q2'18

Q2'19

Q4'19

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Financial Sector Development Highlights
The Capital Market Authority Announces the Adoption of The Financial Academy Has Signed Agreements and
the Amended Rules on the Offer of Securities and Continuing Memoranda of Cooperation with a Number of Entities
Obligations The Financial Academy – an initiatives of the Financial Sector
The Capital Market Authority (CMA) Board has adopted the Development Program - and the Human Resources
amended Rules on the Offer of Securities and Continuing Development Fund (Hadaf) signed a memorandum of
Obligations (the Rules). Initiated on 1/1/2020. One of the cooperation to train and qualify national cadres in the financial
amendments that have been adopted to the Rules will allow industry and prepare them for the labor market. This will be
foreign issuers to list their shares on the main market. And allow done through the establishment of specialized electronic
all foreign segments investors to invest directly in the foreign training programs on the "Droop" platform as the national
issued shares listed on the main market. In addition, the imposed electronic training platform. The Financial Academy has signed
restricted investment rules by CMA's regulations will not be an agreement with The Accounting and Auditing Organization
obligatory to the investments made by foreign investors in the for Islamic Financial Institutions (AAOIFI) to host their
listed foreign companies in the main market. professional examinations at FA in Riyadh, Jeddah, Dammam,
On the other hand, amendments aim also at developing the and Abha.
Parallel Market (Nomu) and promoting the trading and listing in Further, within the Sustainability and Empowerment Program,
the market allowing the direct listing in the Parallel Market. Also, a partnership agreement was signed between the Financial
the amendments included the expansion of listing so that it is not Academy and the General Authority for Awqaf to empower the
limited to expert investors. This is in continuance to the CMA’s profitable sector through training and developing employees in
effort to regulate and develop the capital market, in addition to Awqaf sector. The Financial Academy (FA) and the IE Business
deepening it and promoting its role in the attractiveness of the school has signed a memorandum of understanding (MOU) for
market. In line with the Financial Sector Development Program providing high end, cutting edge, professional trainings in the
objectives. field of Finance, Banking, Capital Market and insurance, through
their international professional’s lecturers to the market to
The Capital Market Authority (CMA) Opens the Door to increase the financial knowledge and efficiency for the
Apply for a Financial Technology Experimental Permit executives in the Kingdom of Saudi Arabia.
(FinTech ExPermit) for the 3rd Batch
The CMA welcomed applications for the 3rd batch for the FinTech The Governor of SAMA Thanks the Leadership for
ExPermits effective from 01/12/2019 through 30/01/2020. The Approving the Establishment of the Saudi Payments
CMA looks forward to receiving new models in this batch, these Company
include facilitating the distribution of investment products and The Governor of the Saudi Arabian Monetary Authority (SAMA),
increasing the efficiency of services provided to investors. The Dr. Ahmed bin Abdulkarim al-Kholifey, thanks the Custodian of
Authority had previously announced the opening of the first the Two Holy Mosques King Salman bin Abdulaziz and His
batch of applications in February 2018 and had received a Royal Highness Prince Mohammed bin Salman, Crown Prince
number of FinTech applications. It had granted the FinTech and Deputy Prime Minister and Minister of Defense for the
ExPermit to two applicants to create an equity crowdfunding cabinet approval of SAMA’s request to establish Saudi Payments
platform. The second batch of FinTech applications opened in Company.
October 2018. The CMA had again received a number of The establishment of the company is in accordance with
applications and had so far granted the FinTech ExPermit to six international best practices, which usually entrust the
applicants to create an equity crowdfunding platform, as well as a preparation and operation of payment infrastructure services to
robo-advisory platform. national companies. Whereas central banks contribute in
This initiative aims at enhancing the innovation and development establishing the infrastructure with the aim of linking local and
of technology in the financial market and providing a supportive international payment service providers from licensed banks
regulatory framework for the participants to conduct their work and companies with payment networks and systems.
efficiently in light of the rapid development in the exploitation of It is worth mentioning that the payments sector in the Kingdom
financial technology (FinTech) associated with the securities has witnessed remarkable developments during the past 30
business in the Kingdom; and to find new financing and years. SAMA has constantly worked with the financial sector to
investment means for entrepreneurs and investors based on the develop national payment systems in accordance with the latest
strategy of the CMA in facilitating financing and stimulating technical standards and international best practices. SAMA
investment under the umbrella of the Financial Sector worked as well within the Financial Sector Development
Development Program (FSDP). program on several initiatives aimed at accelerating innovation
and developing the sector.
Listing and Trading Government Debt instruments in the
Saudi Stock Market
The Saudi Stock Exchange Company (Tadawul) approved during
the fourth quarter of 2019 the request submitted by the Ministry
of Finance to list debt instruments issued by the government of
the Kingdom of Saudi Arabia in accordance with the listing rules
with a total value of (1,783,900,000) riyals. And the inclusion of
government debt instruments from a previously listed category
with a total value of (11,994,561,000) riyals.

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SAMA Launches Draft "Payment System and Services in the Within the Initiatives of the Saudi-Emirati Coordination
Kingdom" For Public Feedbacks Council - the Inauguration of the First Saudi and UAE Banks
The Saudi Arabian Monetary Authority (SAMA) announces the Conference to Discuss Challenges and Opportunities of the
launch of the draft payment system and services in the Kingdom, Banking Sector
calling on the public and interested parties - in order to enhance On 24th November, 2019, the first joint conference of Banking
the principle of transparency and participation - to give their Officials in Saudi Arabia and the United Arab Emirates was
comments and views on the project. launched. It was organized by SAMA in cooperation with the
SAMA explained that the project aims to develop a regulatory Central Bank of the United Arab Emirates in Riyadh.
framework for the payment infrastructure to keep pace with His excellency, Dr. Kholifey, pointed out that the conference is
developments in the field of payments and raise the level of an opportunity for bank officials in the two countries to discuss
efficiency and flexibility of financial transactions, and promote and identify the main challenges and opportunities in areas that
innovation in financial services in accordance with international have become of high importance at the international level and
standards and to ensure the stability of the financial sector and have an impact on the banking sector. The vision of the Saudi-
fair transactions. This is in order to achieve the aspirations of the UAE Coordination Council is to create an exceptional model of
Kingdom Vision 2030. SAMA stated that it took into account the integration and cooperation between the countries at the
preparation of the draft payment system and services in the regional and Arab levels through the implementation of joint
Kingdom, international best practices in the field. strategic projects for the happiness and prosperity of the
peoples of both countries. One of the most important objectives
SAMA Holds a Workshop on "Facilitating the Application of that SAMA seeks to achieve within the framework of the
Islamic Financial Services Board Standards" Financial Sector Development Program; is to reduce
The Saudi Arabian Monetary Authority (SAMA), in cooperation dependence on cash circulation, through the continuous
with the Islamic Financial Services Council, held a training development of the infrastructure of national payment systems
workshop entitled (Facilitating the application of the standards of in order to facilitate the transition to a digital environment for
the Islamic Financial Services Council). payments, which is pouring directly to encourage a non-
The workshop aims to discuss the Islamic Financial Services Board monetary society.
standards related to the banking sector such as the standard of
capital adequacy requirements and risk management, and the SAMA Launches a Draft "Regulation for the Provision of
basic Islamic banking principles of control related to investment Payment Services in the Kingdom", Inviting Comments
accounts in the Islamic banks. Additionally, it reviews the Thereupon
guidelines issued by the Islamic Financial Services Board The Saudi Arabian Monetary Authority SAMA" announces the
regarding investment accounts in Islamic banks and the launch of a Draft Regulation governing the Provision of
mechanism to promote and protect the rights of the holders of Payment Services, in-line with its efforts to achieve the
these accounts. The workshop will enhance participants' objectives of the Financial Sector Development Program, in
understanding of Islamic banking standards and guidelines and enabling financial institutions to support private sector growth
exchange experiences among Gulf and Arab central banks by opening financial services to non-banking actors (payment
involved in the implementation of the IFSB standards. This comes services providers and financial technologies), supporting
as part of a series of workshops sponsored by SAMA aimed at development of the national economy.
building competencies in Islamic finance locally and It also aims to support the achievement of "SAMA’s strategic
internationally and promote Kingdom's pioneer status in this goals” in promoting financial inclusion and reliance on
industry where the Islamic banking in Saudi Arabia represents technology in the field of payments to reduce cash transactions,
about 20.2% of the assets of the Islamic banking industry globally. as well as regulating the payments sector and coping with
developments in it according to international best practices.
Upon preparing the Draft Regulation for the provision of
payment services in the Kingdom", SAMA has conducted
studies and made similar comparisons with some countries
within the Group of Twenty, in addition to holding workshops,
meetings and discussions in cooperation with the relevant
consultation offices and the participation of members, relevant
bodies, and global payment service providers.

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Financial Sector Development Program KPI’s

Program KPIs Baseline Status 2020 Target

Share of non-cash transactions (% of total transactions) 16% 36% 28%
# of adults with a bank account (%) 74% - 80%
# of Fintech players - 4 3
SME loans as % of bank loans 2% 5.7% 5%
38%(health) - 45%(health)
Coverage ratio of insurance schemes,%
45%(motor) - 75%(motor)
Assets under Management, as % of GDP 12% 16.94% >=22%
Market concentration of top 10 companies by market cap , in %* 57% 60.32% 55%
Institutional investors’ share of value traded % 18% 35.96% >=20%
Foreign Investor ownership of the equity market cap , in %* 4% 9.35% >=15%
# of micro and small cap companies listed, as % of total number of companies listed 34% 40.68% >=40%
Share of investment accounts opened through eKYC - 89% 10%
Minimum free float of equity market cap., in % of total outstanding shares* 46% 55% >=45%
Total amount of savings held in savings products, B SAR 315 - 400
% of households savings on a regular basis 19% - 29%
Share of A/C opened through eKYC % - 2% 10%

*Excluding Aramco

Financial Sector Development Program

The Financial Sector Development Program is one of the executive programs launched by the Council of Economic and
Development Affairs (CEDA) to achieve the objectives of Vision 2030. The role of the program is to create a diversified and
effective financial sector to support the development of the national economy, diversify its sources of income and stimulate
savings, finance, and investment. The program will achieve its ambition by enabling financial institutions to support private
sector growth, promoting and enabling financial planning, and ensuring the formation of an advanced capital market, without
impeding the strategic objectives intended to maintain the financial services sector’s stability.

Sources: Ministry of Finance, Saudi Arabian Monetary Authority (SAMA), Capital Market Authority (CMA), General
Authority of Statistics, Tadawul, Bloomberg, Reuters Eikon

*The data of foreign bank branches operating in Saudi Arabia have been amended and updated as per international best
practices and the Monetary and Financial Statistics Manual in SAMA monthly bulletin

This report has been published by Financial Sector Development Program Office. For questions or comments, please contact
us at fsdp@mof.gov.sa or for more information, please visit https://vision2030.gov.sa/en/FSDP

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