Doing Business In Saudi Arabia - Bna

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Chapter 7: Trade and Project Financing
5/13/2008
How Do I Get Paid (Methods of Payment)
How Does the Banking System Operate
Foreign-Exchange Controls
U.S. Banks and Local Correspondent Banks
Project Financing
Web Resources
How Do I Get Paid (Methods of Payment) Return to top
An irrevocable letter of credit (L/C) is the instrument normally used for Saudi imports.
Open account, cash in advance and documentary collections are also acceptable if
both parties agree. Maximum or minimum credit terms are not required. Export Credit
Insurance for political and commercial risk is available from the U.S. Export-Import
Bank in Washington, D.C.
Through an initiative of the local banks, the Saudi Credit Bureau (SIMAH) is Saudi
Arabia’s first comprehensive consumer credit bureau. Established in 2003, SCB will
only extend its services to members in the banking industry. The current laws of Saudi
Arabia do not allow sharing of financial information with non-banking institutions.
Debt collection is usually undertaken by a number of law offices. A representative list
of lawyers is available through the U.S. Commercial Service.
How Does the Banking System Operate Return to top
An important development in the Saudi financial scene was the Royal Directive (May
9, 2006) to establish the King Abdullah Financial District in Riyadh, which will house
major financial institutions, the Capital Market Authority, the Stock Exchange, and
other service providers.
The Saudi banking system remains one of the strongest and most profitable in the
region. Although net income came down more than 14 percent from $9.4 billion in
2006 to $8.06 billion in 2007, total assets of the Saudi banking sector went up more
than 24 percent, from $229.6 billion in 2006 to $286.7 billion in 2007. Ramifications of
the stock market collapse in 2006 have negatively affected the banking sector’s profits
in 2007and most of the country's banks are now trying to boost income from other
sources, particularly retail lending. Aggregate consumer borrowing increased more
than 21 percent, from $126.9 billion in 2006 to $154.1 billion.
In March 2006, the Council of Ministers approved the establishment of Inma’ Bank
(The Development Bank). Capitalized at $4 billion, the founders include the Public
Investment Fund (10%), the Pension Organization (10%), and the General