1. Eng. Osama Al-Mobarak Director of Kafalah Financing Guarantee Program, SIDF (K.S.A)

2. Outline 1.The Role of Kafalah in Supporting SMEs 2.Kafalah’s Achievements Since its Inception (2006 – 2014) 3.Challenges Facing Kafalah & Kafalah’s Responsive Actions 2

3. The Role of Kafalah in Supporting SMEs

4. 4 Kafalah Program : Kafalah was established in January 2006 To improve the financing for small and medium enterprises By covering a percentage of financing risk taken by financial institutions To encourage them to provide the necessary funding to SMEs in Saudi Arabia. The Role of Kafalah in Supporting SMEs

5. 5 Kafalah Definition of SMEs : Any activity founded in accordance with the regulations in Saudi Arabia, With annual sales not exceeding SR30 million ($8 million). The Role of Kafalah in Supporting SMEs

6. Program Vision : The Program aims to foster, support and develop SMEs to enable them to contribute positively to the social and economic development. The Program seeks to increase the level of financing provided by local financial institutions to SMEs through provision of guarantee services. 6 The Role of Kafalah in Supporting SMEs

7. The Program’s capital is about SR 200 million : SR 100 million granted by the Ministry of Finance Around SR 100 million granted by Saudi commercial banks 7 The Role of Kafalah in Supporting SMEs

8. SME Seeks funding Banks Require additional security to provide loans Kafalah Issues guarantee to bank max 80% of funding value 8 Kafalah Process : The Role of Kafalah in Supporting SMEs

9. Industrial Activities of different types Franchise Companies Expansion of Existing Businesses Existing Businesses with High Added Value New Businesses Computer Services Educational Services Cleaning, Maintenance, & Social Services Business Services Tourism & Recreation Transport and Communications Contracting Works Health Services Fishing Activities Activities Serving Agricultural Sector 9 Businesses Eligible for Program Guarantee: The Role of Kafalah in Supporting SMEs

10. Kafalah’s Achievements Since its Inception (2006 – 2014)

11. Years Number of Guarantees Value of Guarantees (‘000) Value of Financing (‘000) Number of Enterprises 2006 5122,16649,14336 2007 262123,003268,709211 2008 293122,345287,755207 2009 504180,787463,973315 2010 777271,230715,489480 2011 1,208635,4191,283,053742 2012 1,670949,4131,767,942918 2013 2,5151,285,5052,348,1251,173 *2014 2,838956,5321,274,0411,130 Total 10,1184,863,8619,784,2685,216 11 * Until the end of 3 rd Q 2014 Kafalah’s Achievements Since its Inception (2006 – 2014)

12. 12 Kafalah’s Achievements Since its Inception (2006 – 2014) * Until the end of 3 rd Q 2014 Number of Guarantees

13. 13 Guarantees by Bank : Kafalah’s Achievements Since its Inception (2006 – 2014)

14. 14 Guarantees by Economic Sector : Kafalah’s Achievements Since its Inception (2006 – 2014)

15. 15 The Program held training sessions for various segments of the SME sector in cooperation with entities such as:  The World Bank & International Finance Corporation (IFC)  The Saudi Institute of Banking  Private sector training providers Kafalah’s Achievements Since its Inception (2006 – 2014) Non-Guarantee Services (Training):

16. 16 Targeted trainees:  Ambitious young people who want self-employment.  Owners of existing SMEs.  SME banking staff of commercial banks. Training contents:  Operations, marketing and financial management of SMEs.  Banks loan procedures and conditions.  Kafalah procedures and conditions. Kafalah’s Achievements Since its Inception (2006 – 2014)

17. Kafalah has trained more than 1,400 trainees : 17 Kafalah’s Achievements Since its Inception (2006 – 2014)

18. Challenges Facing Kafalah & Kafalah’s Responsive Actions

19. 19 Challenge: Slow progression in the cooperation & activity of participant banks. Banks’ centralization in decision making & focus on central branches. Kafalah’s Responsive Actions: Regular meetings with banks’ executives to encourage the increase of activity and encourage the distribution of focus and decision making to all bank branches. Challenges Facing Kafalah & Kafalah’s Responsive Actions

20. 20 Challenge: Stakeholders absence of knowledge about the role of credit guarantee schemes and Kafalah’s procedures. Kafalah’s Responsive Actions: Training sessions for banks staff, in cooperation with the Institute of Banking. Training sessions for chambers of commerce staff. Challenges Facing Kafalah & Kafalah’s Responsive Actions

21. 21 Challenge: Lack of SMEs awareness with regards to banks processes and requirements. Misunderstanding Kafalah’s role. Kafalah’s Responsive Actions: Several workshops and presentations around the kingdom to improve awareness. Kafalah promotion campaigns. Challenges and Obstacles Facing Kafalah Challenges Facing Kafalah & Kafalah’s Responsive Actions

22. 22 Challenge: Lack of the following skills within SMEs, leading to failure in meeting acceptable credit standards, and to loan rejection :  Business planning skills.  Skills in preparing loan requests. Kafalah’s Responsive Actions: Numerous training sessions and presentations around the kingdom to improve business planning skills. Challenges Facing Kafalah & Kafalah’s Responsive Actions

23. 23 Challenge: High average levels of :  Collaterals required by banks  Loan fees Kafalah’s Responsive Actions: Increased Kafalah guarantee levels from 50% to 75% to 80% to encourage banks to lower collateral conditions and loan fees. Challenges Facing Kafalah & Kafalah’s Responsive Actions

24. 24 Thank you for listening