The Implementing Regulation for Financing Small- and Micro-Enterprises



Article 1.: Definitions 

The definitions mentioned below shall have the meanings explained in front of them wherever they are mentioned in this implementing regulation unless the context requires or necessitates otherwise.  
 
The bank 
The Social Development Bank 
The system 
The banking system of the Social Development Bank 
The implementing regulation 
The implementing regulation for financing the small- and micro-enterprises 
The board of directors 
The Board of Directors of the Social Development Bank 
Financing scope  
Every economic activity which the bank seeks to finance based on the targeted categories on which the bank focuses 
The committee 
The committee which is responsible for endorsing the financing  
Financing applicant 
The one who applies for financing be it an individual, partners or a corporate entity
Beneficiary 
The applicant who signed the financing agreement with the bank 
Financing agreement 
The agreement which has been signed between the bank and the beneficiary  
The venture or the enterprise 
The economic activity which has been financed by the bank 
The productive families 
The enterprises whose major businesses are initiated at home by one of the family members with a financing limit that does not exceed 50.000 Saudi Riyals 
Taxis and transportation vehicles                               
The enterprises that depend in their activity on vehicles, and which are run individually by the financing applicant with a financing limit that does not exceed 200.000 Saudi Riyals 


Article 2.: Purpose of the implementing regulation 

This implementing regulation aims to set a framework that contains the general terms and conditions for obtaining financing from the bank for establishing the small- and micro-enterprises. The Managing Director of the Bank sets the executive procedures that regulate the financing applications.

 

Article 3.: Goal of financing 

  1. Supporting and encouraging the qualified citizens to start entrepreneurship / self-employment 
  1. Contributing to creating job opportunities for the citizens 
  1. Contributing to enhancing the role of the small- and micro-enterprises in the national economy 
  1. Supporting and encouraging economic / business activities in the underdeveloped regions 
  1. Supporting low-income citizens in shifting from dependency on government sponsored welfare programs to developing their own income. 
 

 

Article 4.: General conditions for applying for financing

  1.  The financing applicant must be a Saudi citizen. 
  2. The applicant must have the qualifications or the appropriate experience to work in the enterprise and manage it. 
  3. The age of the applicant should not be less than 18 years old. 
  4. Financing can be granted to the applicant if he/she is a partner or an owner of another business establishment provided that the loan disbursement shall be based on the enterprise that he is seeking financing to and on its assets, and he does not use another business establishment other than the one he is applying to obtain financing for.
  5. The applicant cannot combine between two financing applications for the bank financing products in the enterprise sector at the same time. 
  6.  Financing can be granted to the applicant if he / she is a part-time employer provided that he recruits a Saudi experienced full-time manager to run the business establishment3. 
  7. The financial and credit position of the applicant should be in good standing to allow him / her to obtain financing. 
  8. The financing applicant has to apply for the financing through the electronic website of the bank, and complete all the other requirements pertinent to completing the evaluation process followed by the bank. 
Conditions for the corporate entities: 
 
  1. The corporate entity that applies for financing should have obtained all the necessary permits from the relevant authorities. 
  2. The corporate entity should have individuals with appropriate experience to work in the enterprise and run it. 
  3. The corporate entity cannot combine two financing applications for the bank financing products at the same time. 
  4. The financial and credit position of the corporate entity should be in good stead so as to allow it to obtain the financing. 

 

Article 5.: Financing endorsement committee 

A committee for endorsing the financing of the small- and micro-enterprises- except for the productive families, taxis and transportation vehicles- shall be formed by a decision from the Managing Director of the Bank and its decisions shall be final and its duties shall be the following: 
  1. Deciding on the recommendation submitted by the relevant department 
  2. Ensuring that the enterprise that is submitted for financing corresponds to the financing goals and strategies of the bank 
  3. Ensuring that the value of the financing is commensurate with the suggested grace and repayment periods proposed by the concerned department 
  4. Ensuring that the financing application has successfully passed and completed all the requirements in all its stages and procedures 
  5. Ensuring that the presented guarantees are adequate of safeguarding 
 

Article 6.: Steps to obtain financing 

  1. Obtaining a recommendation for financing the enterprise from the concerned department. 
  2. Obtaining an endorsement of financing the enterprise from the committee. 
  3. Providing all the required guarantees that are commensurate with the financing agreement.  
  4. Signing the financing agreement with the bank.
  5. Completing all the credentials, documents and permits necessary to implement the enterprise in accordance with the regulating policies of the bank. 

 

Article 7.:  Scope of financing 

First: Financing limit 

The amount of financing granted by the bank shall be of no more than four million Saudi Riyals. The financing amount depends on the feasibility study of the enterprise and its investment cost that is endorsed by the bank. In all cases, the investment cost of the enterprise should not exceed the double of this limit. 

Second: Priority of Financing 

The priority of financing shall be given to the enterprises that fulfill the highest number of the following criteria: 
  • Enterprises whose investment cost is less than one million Saudi Riyals 
  • New or under construction enterprises 
  • Enterprises that are located in remote or underdeveloped regions 
  • Enterprises that depend on benefiting from the comparative advantage of the region on which they are established. 
  • Enterprises that are committed to achieving the highest percentage of employment of Saudi nationals. 
  • Enterprises that are creative and non-conventional 
  • Enterprises that target job seekers and families who receive social security allowances 

Third: Amount of financing provided by the bank 

If the investment cost of the enterprise exceeds five hundred thousand Saudi Riyals, the self-financing percentage required from the applicant should not be less than 8 % of the total investment cost of the enterprise and should not be more than 50 %, in accordance with the policies set by the administration of the bank
 

Article 8.:  Disbursement of financing  

  1. The financing amount shall be disbursed in accordance with the disbursement procedures and the plan of the financing distribution that is endorsed by the bank. 
  2. The financing payments shall be disbursed in one of the following two ways, separate or in conjunction, in accordance with what the bank deems appropriate: 
          A. Direct payment for the benefit of the owner of the enterprise 
          B. Payment for the benefit of the contractors and suppliers


Article 9.: Grace and payment period  

  1. The beneficiary shall be granted a grace period starting from the date of receiving the first installment of financing and this grace  period lasts for a maximum of three years. 
  2. The beneficiary shall be committed to repayment of the amount of financing on regular installments which are to be determined in the financing agreement provided that the period of repayment should not exceed 8 years starting from the end date of the grace period. 


Article 10.: Administrative fees  

Affordable and stimulating administrative fees in support of MSMEs.

 

Article 11.:  Financing guarantees   

In accordance with the provisions of Article 13. of the bank system, the beneficiary shall present, in return for the financing, adequate guarantees of the ones mentioned below to preserve the rights of the bank.
    
  1. Mortgage of the assets of the enterprise under financing 
  2. Mortgage of a property other than his / her private residence 
  3. Mortgage of other properties 
  4. A personal security (surety bond) 
  5. A financial guarantee   
The applicant to be financed should submit payment bonds covering the value of financing, and the bank reserves the right to accept or require any other securities that it deems appropriate.
 
 

Article 12.:  Beneficiary commitments  

  1. The beneficiary has to open an independent bank account for the enterprise in a commercial bank to deposit the amount of financing, and manage the funds of the enterprise. However, this does not apply to enterprises that do not require opening a bank account such as the productive families, taxis and transportation. 
  2. The beneficiary has to remain committed to the provisions of the agreement and to the implementation of the enterprise according to what has been agreed upon. 
  3. The beneficiary has to grant the bank an access to the enterprise bank account and allow it to obtain copies of the bank statements. 
  4. The beneficiary has to adopt an adequate accounting system that will enable the bank to access the accounting operations related to the enterprise. 
  5. The beneficiary has to regularly pay the installments of financing as stipulated in the provisions of the financing agreement. 
  6.  The beneficiary has to be fully co-operative with the bank or whoever represents it to follow up on the progress of the enterprise. 
  7. The beneficiary may not change the business activity or the location of the enterprise without obtaining a written permission from the bank. 
     

Article 13.: Enterprise faltering  

If the bank, through the follow up process, deemed that the enterprise is running into difficulties hindering its implementation in accordance with the plan that has been agreed upon, the bank shall have the right to do the following: 
 
  1. Investigating the causes of faltering and providing the appropriate solutions through collaboration between the two parties. 
  2. The bank has the right to work in collaboration with the beneficiary on correcting the course of the enterprise. 
  3. The Managing Director of the Bank, or whoever he delegates, has the right to extend the period of repayment provided that it does not exceed the double of the repayment period depending on the discretionary power of evaluating the causes behind faltering.  
  4. If the beneficiary declined to co-operate with the bank to correct the causes of faltering, or handle the obstacles that stand in the way of the enterprise implementation, the bank has the right to claim the repayment of the financing that has been disbursed to him / her. In case the beneficiary declined, the bank shall take all the necessary legal and judicial measures to protect its rights. 

 

Article 14.: Beneficiary breach in the implementation of agreement  

The standing debt to be accrued from the beneficiary is considered due immediately and has to be paid in one full payment in any of the following situations: 
 
  1. If the bank establishes that the enterprise has not been implemented in accordance with the set plan, or the financing amount has, in part or full, been used for a purpose other than the one it has been assigned to 
  1. If the bank establishes that the information, data or documents which the beneficiary has presented are incorrect or forged 
  1. If the bank establishes that the beneficiary has sold or signed over the enterprise, in part or full, to a third party without obtaining an approval from the bank 
  1. If the beneficiary transfers the enterprise from its original location to another location without obtaining an approval from the bank 
  1. If the beneficiary repeatedly fails to re-pay the installments in their due times stipulated in in the financing agreement 
  1. If the enterprise falters and the beneficiary declines to co-operate with the bank to correct the course of the enterprise as stated in the financing agreement 
  1. If a court ruling has been issued resulting in the termination of the enterprise or making it impossible to pursue its implementation 
 

Article 15.: Mechanism of additional financing  

Unless he / she breaches any of the conditions and terms of the agreement, the beneficiary has the right to apply for an additional financing for only one time for the same enterprise provided that the additional financing does not exceed 100 % of the value of the prior financing. He /she can only apply after the midpoint of the repayment period, on condition that the beneficiary pays his installments in their due times, and provides adequate guarantees. 
 

Article 16.: General terms and conditions 

  1. The bank shall not be responsible for any expenses or financial fees which the applicant may incur during the application process in case the enterprise was rejected. 
  1. The bank shall have the right to obtain credit information about the financing applicant and share it with concerned and relevant authorities. 
  1. The beneficiary cannot change the implementation plan of the enterprise unless he / she obtains an approval from the bank. 
  1. The beneficiary may transfer the enterprise to another location other than the agreed upon with the bank after obtaining an approval from the bank. 
  1. The beneficiary shall be committed to the text of the financing agreement with bank as well as the provisions of the implementing regulation. 
  1. The beneficiary shall be committed to nationalizing the jobs in accordance with the regulations and decisions of the concerned authorities.
  2. The bank shall have the right to pay visits to the business activities which it has financed to ensure that they comply to the provisions of the financing agreement without disturbance or prejudice to their activities and in accordance with the rules and procedures set by the bank. 
  3. If the beneficiary passes away or becomes medically incapacitated in a way that prevents him / her from operating the enterprise and re-paying the amount of financing, the inheritors or the party that succeeds shall have right to pursue the implementation of the agreement as it is. If the inheritors or the guardian declined to accept the implementation of the agreement, the following actions shall be taken: 
A. The bank shall dispose the enterprise by sale or any other means according to what it deems appropriate in conciliation with the  inheritors or their legal representative in a way that guarantees the rights of all parties. 
B. If the two parties fail to reach a reconciliatory settlement to correct the legal status of the agreement, the case shall be referred to  the concerned authorities for adjudication.
 
 

Article 17.: Contesting the decisions of the bank 

The applicant, or his /her representative, whose financing application has been rejected may raise it to the Managing Director of the Bank along with a clarification of the appeal justifications, and demand that his /her application be reconsidered within a maximum of 30 days from the date of his notification of the rejection. 

 

Article 18.:  Execution of the implementing regulation 

The bank sets the appropriate policies for financing in agreement with the provisions of the implementing regulation. 

 
 

Article 19.:  Amendment of the implementing regulation 

The board of directors shall have the right to amend any provision in the implementing regulation whenever it deems it necessary. All of the amended provisions shall be applied to the applications that are presented following the date of amendment.  
 
This implementing regulation supersedes all the previous bylaws and decisions and it becomes into effect starting from the date it is endorsed by the board of directors. This implementing regulation shall be reviewed regularly and shall be published on the electronic website of the bank. 

 

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