Standard Chartered Bank, a British banking and financial services company founded in 1969, started operation of its first branch in Riyadh, Saudi Arabia, around the middle of last May.
The Saudi authorities have approved a license for the National Bank of Iraq (NBA), an Iraqi bank established in 1995, to open a branch last May. The approval came one month after Banque Misr was licensed to start operations in the Kingdom for the first time.
Bank of China, which was granted a license in May 2020, has joined Industrial and Commercial Bank of China (ICBC) as the second Chinese bank to operate in Saudi Arabia.
In the first half of 2020, three banks have been licensed, and more bank branches are expected to launch their operation in a country with the highest GDP in the Arab world, whose economy is expected to grow by 2.4 percent according to the latest International Monetary Fund reports published on July 8, 2021.
Why is Saudi Arabia welcoming more foreign banks? What role can they play to boost the banking industry?
MAP OF FOREIGN BANKS
According to the Central Bank of Saudi Arabia, there are 19 licensed foreign bank branches currently operating or preparing their branches to open soon. Nine of them belong to Arab banks, and the others include four European banks, two Chinese, one Turkish, one American, one Pakistani and one Japanese. They are added to 11 local banks and 2 digital banks (licensed but have not started yet).
The Saudi administration launched the Financial Sector Development Program in 2017, which is part of the executive program belonging to the Kingdom Vision 2030, to enable financial institutions to support the growth of the Saudi private sector, develop an advanced capital market, and boost financial planning.
“The market is hungry for more local and foreign banks. For example, Bahrain, which has smaller economy and population than Saudi Arabia, hosts more than 40 local, regional and international banks. The Saudi market is really big and has the potential to accommodate more banks,” Abdulrahman Al-Ahmed, a financial and accounting expert, told Majalla.
HEATING UP COMPETITION
With every new foreign bank branch being opened or expected to open, the first word that comes to mind is “competition.” Besides that, new job opportunities are created, more clients expect better services, and a new banking player appears.
“The most important role expected from foreign banks coming to Saudi Arabia is to provide high quality services for both individuals and the private sector. This includes competitive personal, residential, and automobile loans, as well as financing SME’s and big companies to grow and prosper, especially now with more governmental spending on mega projects,” commented expert Al- Ahmed when asked about the potential of the Saudi market for foreign banks.
“The Saudi market is very attractive. More foreign banks mean more competition, this with undoubtedly improve the Saudi banking environment,” he added.
WHAT ABOUT CUSTOMERS?
Omar, a key account manager at a local company, told me that foreign banks, especially the GCC one, have developed a different customer experience to attract more clients, adding that this is normal for newcomers, as they go the extra mile.
“This keeps local banks and new foreign banks on their toes, looking for new ways to keep customers happy and bring in new ones. They know that the more they are welcoming and service-oriented, the bigger their share of customers,” he added.
Asma’a, a 29-year-old private sector employee, said that she trusts her local Saudi bank, and is less likely to try a new bank, be it local, Arab, Asian, or international. However, her colleague, Loai, disagrees. He believes that he will go for the lowest loan cost if he ever wants to lease a car, regardless of the nationality of the bank he deals with!