RATINGS

Saudi Arabia 2020 | FINANCE | INTERVIEW

As the government pushes to open up the economy and diversify it away from oil, rating agencies are left with no choice but to put their weight behind the future of the Saudi economy.

Mahmoud Totonji Ahmed S. Al Majed

Could you tell us more about Moody's National Scale Ratings (NSR) in Saudi Arabia, and how it would complement your offering in the Kingdom?

MAHMOUD TOTONJI One of the strategic priorities of the Kingdom is to develop the debt capital market. This is a strategic focus of numerous governmental agencies, private institutions, and organizations that have described creating a deep and liquid debt capital market as a central component of Vision 2030 and is extremely important for the growth of the country and numerous local markets. Moody's provides independent credit opinions for both cross-border and local investors; moreover, it developed the Global Scale Ratings (GSR) for all investors. For local investors, Moody's has announced its intention to offer NSR, which is typically mapped from the GSR. This NSR mapping is designed to enhance the credit differentiation among local credits. So far, Moody's has introduced NSRs in around 17 countries. NSRs are not intended for credit comparisons across geographical borders, but rather within countries. The NSR scale for Saudi Arabia helps local currency investors understand and assess credit investment opportunities within the Kingdom.
What has been Bayan's impact in its three years of operations?

AHMED S. AL MAJED Bayan has advanced rapidly in terms of contracting banks and financial institutions (FIs). Currently, all local banks and FIs are covered, and we expect to integrate with most of them before 2020. In addition, we cover around 75% of FIs in the country. We also target the mega traders in the market that cover more than 40% of the market and register the receivables. This is a completely new service in the country. Bayan is the exclusive provider of Qawaem, an MCI program that curates audited financial statements. In March 2019, we launched a new product called Bayan Indices, adding great value to all financial entities by helping them guide their planning and budgeting for the coming years. We have an opportunity to create a new engine that will collaborate all financials, or about 130,000 audited financial statements in the Kingdom. Using this engine, one can analyze and divide them according to sectors and sub-sectors, and then display indicators. Bayan Indices has 250 financial indicators and ratios for each sector and sub-sector. The source of this is not only listed companies, but non-listed ones as well.

How do you use market parameters to assess your credit ratings for Saudi Arabia as a whole?

MT We opened our office in Saudi Arabia in 2018, but have had a credit rating presence in Saudi Arabia for 13 years. Our understanding of the economy and corporates and strong relationships with market participants are our major strengths. The impact of Saudi Arabia is huge on many local and regional levels. At present, the country is going through extremely exciting times. It announced its Vision 2030 in 2016, and we have seen how rapidly the economy has transformed. Additionally, the transformations are comprehensive, ranging from education and finance to health and industry. Given Moody's historical presence and deep understanding of the Saudi market, we will continue to take a significant interest in this transformation. We anticipate that part of this economic and social transformation is an expanding capital market. For example, one thing the government is focused on is diversifying its economy away from oil. Achieving this objective will require a great deal of investments in different sectors from both local and international investors. Through its independent credit opinions and research, Moody's helps the international investor community better understand and assess credit risk in the Saudi market. Our credit ratings coverage is diverse, though our deepest coverage comes in the banking sector, where we cover 11 out of 12 banks. We cover the large corporations as well as infrastructure and insurance, and see a great deal of potential and interest in expanding our corporate-sector coverage.

What are your strategic priorities and ambitions for the next two years?

ASAM Having the data of more than 1 million CRs in the Kingdom and the information of more than 200 million companies worldwide, our first strategic target is to provide the market with this data in the form of organized and easy-to-read reports, and most importantly create processes that protect consumer data. Being updated on the data provided in reports is also one of our priorities; having members from both financial and B2B trade companies is necessary to stay as the standard in the market. Ultimately, we should be able to cover each and every credit transaction on the market. As a future plan, we plan to cover every fintech player as well.