The International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed a memorandum of understanding with the Saudi Credit Bureau (SIMAH) to advise it on establishing a new credit bureau for small and medium enterprises in the Kingdom of Saudi Arabia.

The project will be managed by IFC’s technical assistance facility, the Private Enterprise Partnership for the Middle East and North Africa (PEP-Mena). The project will assess the business and regulatory environment and provide advice on the viability and optimal structure of a commercial credit bureau for smaller businesses. Follow-on assistance is anticipated to develop a formal business plan and to launch the credit bureau.

Particularly in less-developed markets, the lack of reliable credit information restricts the ability of banks and other financial institutions to lend actively to small and medium enterprises. Credit bureaus can provide timely, accurate and reliable information about the past borrowing behavior of current and potential clients, information that can be used by banks and other financial institutions to improve the quality of their loan portfolios. As for the smaller enterprises themselves, they gain greater access to financing sources by being able to turn positive borrowing histories into better access to finance.

“Worldwide, SMEs have been key drivers of job growth. The establishment of a commercial credit bureau in Saudi Arabia will help these smaller businesses by allowing them greater opportunities to borrow, grow, and create jobs. It will also bring positive benefits to the banking sector by improving the quality of information available on potential borrowers,” says Sami Haddad, IFC’s director for the Middle East and North Africa.

“The establishment of a specialised credit bureau will help Saudi banks become more active in the SME market and improve their portfolios,” says Nabil Al-Murbarak, general manager of Simah.

Simah is jointly owned by Saudi Arabian banks that recognise the importance of reliable credit information to improving the quality and speed of their credit decisions, especially for the SME sector.

PEP Mena is IFC’s technical assistance facility that supports private sector development in the Middle East and North Africa. It focuses on improving the business-enabling and regulatory environment in the region; strengthening the financial sector; promoting the growth of small and medium enterprises and their support services, such as business organisations and consulting firms; helping restructure and privatise state-owned enterprises; and developing viable private sector and public-private partnership projects, especially in infrastructure.