Saudi Arabia

The economic transformation of Saudi Arabia over a 20 year period from a basically agrarian economy to a growing industrialised power has placed considerable demands upon its banking system. As this chapter will show, these challenges have been met in the main by the commercial banks working alongside a limited number of highly active, semi-government funding agencies. The banking habit has established itself in Saudi Arabia, but it has been slow in coming compared, for example, with Kuwait. Capital markets, as yet, are neither developed nor sophisticated in the Kingdom largely because until recently the need for them has not been there; the emphasis has been upon public-sector activity, the provision of infrastructure of all kinds and the large-scale development of petrochemicals and related industries within the public sector — all funded from oil revenues. However, with the growth of the Saudi population, the workforce, private-sector industry and trade, and smaller scale, profit-orientated projects, the commercial banks are being encouraged to play a more direct and active role in the industrialisation process and to move away from trade finance. In parallel, the capital markets must be more fully developed, if only in the short term, to cover the shortfall in oil revenues.