IF YOU BUILD IT

Saudi Arabia 2018-19 | FINANCE | INTERVIEW

By expanding their range of services to far more SMEs, lenders are helping achieve Vision 2030 by building a more transparent business environment.

Mohammad Al-Yousef
BIOGRAPHY
Mohammad AlYousef is the first CEO of Bayan Credit Bureau, responsible for building Bayan as well as crafting the company’s growth. He works directly with shareholders and development teams to formulate and achieve corporate goals while ensuring compliance with related regulations, maintaining international standards and service excellence. AlYousef is an entrepreneurial leader with an extensive experience in investment, risk, credit, and SMEs. He holds a master’s degree from the University of San Francisco and a professional certificate in risk management from New York University.

What was behind the process of setting up this company?

The idea of Bayan started in 2014 in response to a lack of data in terms of obtaining credit, especially for SMEs. The Ministry of Commerce and Investment found a gap in commercial, business, financial, credit, and receivables data not only in Saudi Arabia but the entire Middle East. There was a large feasibility study that took us more than 10 months of comprehensive data gathering and research evaluations; we visited many countries, met with several major players in the credit bureau world, and surveyed over 4,000 businesses in Saudi Arabia, including banks and financing houses. Results showed that there was a high exposure of receivables in Saudi Arabia only dedicated to medium- and large-sized companies. Around 75% of large companies refuse to sell on credit to small companies, and even if they do, their credit terms are typically 30 days, which is short compared to the 90 days typical for large companies. SME lending is extremely low in Saudi Arabia, at around 2.4-2.5% of lending portfolios, compared to around 8-10% in other countries in the Middle East and 20% globally. When it comes to data analysis, there are many layers of data that Bayan analyzes; First is the commercial layer, namely the owners, their holdings, the company's registration details, and so on. The second is financial information of SMEs and their secondary data; third is financial data, which previously could only be found on public companies published on Tadawul. We are also creating a new layer that includes trade credit information, the first time a credit and a trade bureau have been integrated in the region. It is a fact that of the 1.2 million registered businesses, around 98-99% are SMEs, though coverage of their credit data is only about 6%. This means there is no data, previous banking relations, or credit records for 94% of SMEs. Regarding risk data, we focus on different risk layers: the supply chain risk, receivables, and payables risk.

Where does all that information, long been hard to obtain in Saudi Arabia, originate?

Since 2014, the Ministry of Commerce and Investment has done a great job by establishing a new platform called Qawaem Program, which translates into “financial statements program." The ministry has also amended some laws and clauses in the commercial law, and companies now have to submit soft copies of their financial statements for renewal rather than hard ones. The role of Qawaem is to receive data, but it needs front-end commercial platforms to distribute this data to beneficiaries since it is regulated and licensed by SAMA within the Credit Information law. SAMA conservatively sets forth certain guidelines and procedures not to allow data of the subject company to be released to any company before its consent, so that mandate was given to Bayan. This is the first time that a country has an integrated hub starting from registration of information, order confirmation, trade received payables confirmation, and banking and financial information. This will help Saudi Arabia, the SME Authority, Saudi Arabian Monetary Authority (SAMA), and the Ministry of Commerce and Investment achieve their targets and boost SMEs' contribution to GDP to 35%.

Will you still function as a credit bureau in the sense that banks will pay Bayan for the data it has processed?

Any bank, wholesaler or individual, selling on credit—no matter if they sell goods or issue debt—will benefit from Bayan's services. Since the government is keen to support the commercial sector toward achieving Vision 2030 and building a transparent business environment in Saudi Arabia, it decided to invest 55% into Bayan, 15% of which will be through the Takamol Holding company and 40% through Thiqah. We have flexible products, so a small store can subscribe to Bayan, provide us with their data, and benefit from our platform.