Financial Sector Development Program, Ongoing Achievements and Solid Stability

Since its inception in 2018, the Financial Sector Development Program (FSDP) has sought to achieve coherence and integration within the financial sector’s tools and mechanisms working to realize ongoing growth and solid financial stability and utilizing innovative approaches in service management and development.

Launched by the Council of Economic and Development Affairs, the FSDP is one of the executive programs to achieve the objectives of the Kingdom’s Vision 2030. The FSDP aims at developing a diversified and effective financial sector to support the development of the national economy, diversify its sources of income, and stimulate savings, finance and investment through improving the financial institutions and transforming the Saudi Stock Exchange into an advanced equity market.

Despite its relatively short lifespan, the program has succeeded in realizing several achievements to the financial sector as a whole, including primarily the 36% increase in non-cash transactions in 2019, which surpassed the FSDP’s target of 28% for 2020.

As per its endeavor to enhance saving, the FSDP has sought to reduce the nominal value of the Saudi Arabian Government SAR-denominated Sukuk after it went down from SR1 million to SR1000 without changing the total tranche size with the aim of expanding the buyers and investors base.

A financial derivatives market has been also launched under the FSDP, constituting a significant progress in the endeavor to develop the Saudi Stock Exchange and provide investors with an integrated and diverse product and service package.

Joint efforts with the program’s stakeholders (Ministry of Finance, the Saudi Central Bank (SAMA), the Capital Market Authority and the Small and Medium Enterprises General Authority) have resulted in advancing the Kingdom of Saudi Arabia’s ranking in more than 13 global competitiveness and financial market indicators seen primarily in the inclusion of the Tadawul-listed companies into the MSCI Emerging Markets Index and the FTSE Russell and S&P Dow Jones Indices all leading to bringing in SR76 billion worth of financial flows, thus expanding the investor base in the financial market and improving its liquidity levels. The program has also contributed to increasing trading volume in the secondary domestic debt market to more than SR70 billion in 2020, signaling a 600% increase from the SR10 billion recorded in 2019.

The Kingdom of Saudi Arabia has achieved significant progress in Protecting Minority Investors Index, rising to seventh in the world, in addition to securing a seat in the Financial Action Task Force (FATF) with full membership to be the first Arab country to obtain membership in FATF. Saudi Arabia is one of the world’s most advanced countries in terms of financial systems and the implementation of anti-money laundering law and anti-terrorism financing.

With the development of the financial sector requiring keeping pace in the fast-changing world of technology, the government has moved towards investing heavily in the technical infrastructure and the use of optical fibers and the latest technologies, improving the financial technology first and then gearing to digital financial solutions, including financing procedures and the experimental environment for financial technology in the Saudi Central Bank (SAMA) and the Capital Market Authority.

The number of authorized payment processing companies in the financial technology sector has reached 13 in addition to another 32 companies authorized to operate in the experimental environment. Seven companies working in securities business have been authorized to experiment the financial technology. As part of the program’s endeavor to reach a cashless society, 11 new financial technology companies have been licensed in the field of electronic payments.