Nov. 5, 2018
Crown Prince Mohammed bin Salman, the architect of Vision 2030, has made entrepreneurship a vital component of the Kingdom's future economy. To advance this entrepreneurial mindset and to encourage young graduates to choose careers as entrepreneurs, several new programs are falling into place in the coming years.
Vice-Minister for Economy and Planning Faisal Alibrahim, himself from the young generation and coming from the private sector, commented on Saudi's plans to turn business intentions into actual businesses “This intent can be leveraged toward the entrepreneurial activity in the country and to strive for an active SME system, with excellent access to funding and mentorship and with supportive regulations." He emphasizes, though, that there has been a cultural change, and that in the past starting a business was less socially acceptable. Going forward: “Some of the labor challenges, for example the unemployment ratio or the mismatch in education and industry requirement, can be solved by opening the door for entrepreneurs and especially new market entrants like young graduates, male and female."
As the government takes a holistic approach, there are now organizations that focus on different aspects of the ecosystem. To encourage more technological innovation, King Abdulaziz City for Science and Technology (KACST) further invested in the Business Incubator & Accelerator Company (BIAC), which functions as a start-up incubator providing funding, mentorship, and office space for innovative young companies. The company was launched in 2017 and is headed by Nawaf Alsahhaf, who explained, that BIAC aims to bring innovators and accelerators together, also leveraging its strong relations with venture capital firms. This helps bring seed funding to entrepreneurs.
Taking a broader and more inclusive angle, the Social Development Bank (SDB) was restructured to provide loans for aspiring entrepreneurs from any background. Unlike other government funds, there is no specific industry mandate and the typical loan SDB provides goes up to SAR300,000. SDB is involved as start-up catalyst until it reaches the right size for the SME General Authority to step in. SDB does not take any profits and has lowered the burden for many entrepreneurs to get funding, thus becoming a start-up engine. According to Abdullah Abdulrahman Alnamlah, the former general manager who was responsible for the refocusing of SDB, the unconventional bank has funded start-ups with a failure rate of 37%, well below the global start-up failure rate of 90%.
As part of SDB, the Dulani Business Center was developed to provide mentorship and consultation services free of charge to entrepreneurs. Dulani is built on the premise that funding is not the largest challenge for SMEs in the Kingdom, but rather the main challenges are understanding regulations, finding the right staff, and honing management skills.
The regulatory framework is the responsibility of the SME General Authority, guided by the Ministry of Commerce and Investment. Together, they launched MERAS in 2018 to become the one-stop-shop for all government interactions. Via an e-portal, entrepreneurs are now able to obtain all the necessary licensing and company registration online. MERAS aims to be customer-centered, with both an online presence and brand new bricks-and-mortar customer centers to invite aspiring entrepreneurs to come and discuss their business plans. Ahmad Ali Alobaishi, who heads the MERAS program within the Ministry, explained that this program is empowering the SMEs and in fact redesigns the investment journey. MERAS has sparked broad interest from youth and women that seek to enter the labor market with their own business initiatives.
With a maturing investment ecosystem, better access to funding and guidance, and more centralized registration process, the Kingdom is preparing for a wave of start-up companies to diversify its economy away from natural resources and heavy industry.