Saudi Arabia 2017 | FINANCE | COLUMN

TBY talks to Ahmed RashId Al Ameer, CEO, Kirnaf Finance, on the sector.

Ahmed RashId  Al Ameer

What was behind the inception of Kirnaf?

Kirnaf was established in 2009 before SAMA regulated this market. We established it under a license from the Ministry of Commerce with the name Kirnaf Investment & Installments Company. There were no banks or finance companies servicing the middle market or the SME sector, which is where we saw an opportunity to operate. In 2014, SAMA began to regulate this market and issued three types of licenses, namely microfinance, lease finance, and mortgage finance. This was when we chose to operate under a lease finance license because it fits our business market. When it comes to SMEs, we have two products: Ijarah and Murabaha. Ijarah is lease financing whereby we buy the equipment or the assets, then we lease it and at the end of the term the customer takes on ownership. Murabaha is used as a working capital finance model; it is Islamic because we are sharia compliant.

What opportunities do you see specifically for the SME sector in the short to medium term?

SMEs represents about 70-80% of the total economy, but it is underfinanced and underserviced. The government tries its best to promote players to support the industry. In fact, the players in this sector are unorganized; they need some time to play or to do professional business, and most of them are simple companies that may not even have produced financial statements, up until becoming licensed. The governments of GCC countries seek to enhance this sector by imposing regulations and pushing them to regulate themselves and conduct their business to professional standards in order for them to be serviced by the finance companies. Our target is mainly SMEs operating in the services segment. Big companies are out of scope for us; we approach all small to medium companies within a maximum turnover of SAR400 million (USD107 million). In 2017, we are optimistic that things will begin to move as the government is pumping cash into businesses. We focus on health, as there is a huge demand for this sector and the government is focusing on supporting this business by launching an insurance program for all citizens.