In exercise of its supervisory and regulatory powers, the Saudi Central Bank (SAMA) announced the opening of a public consultation for stakeholders across the financial sector on the draft update to the Executive Regulations of the Finance Companies Control Law, for the period from 27 April 2025 to 27 May 2025, in preparation for adopting a robust implementing text aligned with market developments and regulatory best practices.
The update is intended—without limitation—to: harmonize the requirements for conducting all financing activities within a single regulatory framework while maintaining activity-specific requirements under separate rules and instructions issued by the Bank; enable finance companies to enhance liquidity and increase their contribution to the Kingdom’s GDP by expanding the aggregate financing they may extend; strengthen controls governing related-party transactions; regulate acquisitions of equity interests in finance companies and offerings in the capital market; re-assess fitness and propriety standards for founders, board members, managers, and their equivalents; and streamline the licensing pathway by reducing the required irrevocable bank guarantee to 20% of the minimum paid-up capital (instead of 100%) for the activity to be licensed, in accordance with the Bank’s prescribed form.
Salient Features of the Amendment
First: Minimum Capital and Bank Guarantee
Adoption of an irrevocable bank guarantee equal to 20% of the minimum capital for the activity/activities to be licensed, using the template prescribed by the Saudi Central Bank (SAMA). The guarantee must be issued in SAMA’s favor by a local bank or a branch of a foreign bank and shall auto-renew until the paid-up capital has been fully paid.
Second: Paid-Up Capital Requirements by Activity
SAR 200,000,000: Finance company conducting real estate finance.
SAR 100,000,000: Finance company conducting one or more financing activities other than real estate finance.
SAR 50,000,000: Finance company conducting SME finance only.
SAR 20,000,000: Finance company conducting consumer micro-finance only.
SAR 10,000,000: Finance company conducting microfinance only.
SAR 10,000,000: Finance company conducting consumer micro-finance via FinTech only.
SAR 5,000,000: Finance company conducting Deferred Payment (Buy-Now-Pay-Later – BNPL) only.
Third: Per-Beneficiary Financing Caps
Consumer micro-finance: shall not exceed SAR 50,000 per beneficiary.
Consumer micro-finance via FinTech: shall not exceed SAR 25,000 per beneficiary.
Microfinance: shall not exceed SAR 200,000 per beneficiary.
Unsecured finance: shall not exceed SAR 100,000 per beneficiary, based on the beneficiary’s credit bureau data; SAMA may increase this cap where appropriate.
Fourth: Fees (Financial Consideration)
SAR 200,000 for license issuance; SAR 100,000 for renewal; SAR 50,000 for amendment.
SAR 10,000 for issuance/renewal/amendment of a microfinance license.
SAR 20,000 for issuance/renewal/amendment of a consumer micro-finance license.
SAR 10,000 for issuance/renewal/amendment of a consumer micro-finance via FinTech license.
SAR 5,000 for issuance of debt-based crowdfunding and BNPL licenses; SAR 2,000 for renewal/amendment of those licenses.
Fifth: Saudization and Governance
Saudization at not less than 50% upon commencement of operations across all managerial levels, with an annual increase of at least 5% of the total workforce until reaching 75%.
Strengthened obligations of the Board of Directors and executive management regarding integrity, competence, risk management, and compliance.
Sixth: Aggregate Financing Caps Relative to Paid-Up Capital and Reserves
A maximum of four (4) times for consumer micro-finance companies.
A maximum of eight (8) times for companies conducting other financing activities.
A maximum of twenty (20) times for BNPL companies.
A maximum of forty (40) times for debt-based crowdfunding companies.
Any exceedance requires a No-Objection Letter (NOL) from SAMA. SAMA may raise ceilings or set limits when multiple activities are combined, taking into account the company’s financial position, performance, and market conditions.
Seventh: Large Exposures and Related-Party Transactions
The company is prohibited from incurring exposure to a single beneficiary equal to or exceeding ten percent (10%) of its paid-up capital and reserves, or exposure to a group of connected beneficiaries where one exercises direct or indirect control over the others (control threshold twenty-five percent (25%)), without first obtaining an NOL from SAMA.
Financing a related party is permissible only on an arm’s-length basis and subject to adequate collateral; the financing amount shall not exceed sixty percent (60%) of the collateral value.
Where the aggregate financing to a related party exceeds SAR 500,000, the granting decision must be approved by the Board of Directors.
The company may not incur exposure to a related party equal to or exceeding ten percent (10%) of its paid-up capital and reserves without an NOL, and aggregate related-party exposures must not exceed fifty percent (50%) of paid-up capital and reserves.
The amendment prohibits the company from incurring exposure to a related party that (i) holds, directly or indirectly, twenty-five percent (25%) or more of the company’s shares/quotas/voting rights or otherwise exercises control over it, or (ii) is controlled by the company or in which the company holds, directly or indirectly, twenty-five percent (25%) or more of shares/quotas/voting rights.
Eighth: Capital Losses and Regulatory Reporting
The company must immediately notify SAMA upon incurring losses exceeding fifteen percent (15%) of its paid-up capital.
Expected Impact of the Amendments .
Professional disclaimer: This analysis is based on the consultation draft and may be modified upon adoption of the final text.
Prudential resilience. The aggregate-financing ceilings relative to paid-up capital and reserves—four times, eight times, twenty times, and forty times, depending on the activity—together with the No-Objection Letter (NOL) requirement for any exceedance, are expected to curb concentration and excessive balance-sheet expansion, thereby supporting system stability.
Liquidity and market entry. Reducing the irrevocable bank guarantee to 20% of the minimum capital (instead of 100%) is likely to ease upfront burdens, facilitating licensing and expansion—particularly for new entrants—while preserving ongoing obligations for risk management and governance.
Capital–risk alignment. Differentiated paid-up capital floors by activity are expected to align capitalization with risk profiles and channel higher-risk or longer-tenor activities toward better-capitalized firms.
Related-party and large-exposure discipline. Limits on exposures, requirements for adequate collateral, and Board approval for specified related-party financings are expected to reduce conflicts of interest and reinforce governance integrity and compliance.
Consumer protection and market conduct. Per-beneficiary caps—and rules governing unsecured finance tied to credit-bureau data—should mitigate over-indebtedness and promote fair treatment, while preserving responsible access to credit.
Innovation and competition. Calibrated frameworks for FinTech consumer micro-finance and BNPL, coupled with proportionate capital and fee thresholds, may broaden product diversity and enhance competitive dynamics, provided prudential controls are maintained.
Saudization and capability building. The staged increase from ≥50% at commencement to 75% (with ≥5% annual uplift) is expected to drive investment in training and develop stronger local capabilities in risk, compliance, and collections.
Compliance costs and operating model. Firms will likely need to update policies (credit, related-party dealings, collateral, disclosures, Board governance), implement monitoring systems for exposure limits and prudential ceilings with early-warning triggers, and ensure immediate notification to SAMA upon losses exceeding 15% of paid-up capital.
Proportionate supervisory flexibility. SAMA’s discretion to raise ceilings or set limits where multiple activities are combined—having regard to a firm’s financial position, performance, and market conditions—enables risk-sensitive, proportionate oversight.
Market-wide effect. Allowing higher aggregate financing within clear prudential guardrails is expected to support finance companies’ contribution to economic growth while maintaining market stability and consumer welfare.