KSA's Lending Market Expected to Reach PHP 67 Bn by 2027, Driven by 4 Key Catalysts: Ken Research

Rising private spending in Saudi Arabia has boosted loan demand, signaling improved living standards. Diverse age groups seek loans for various purposes, with youth pursuing education and startups, while adults prioritize homes and cars. The popularity of Islamic finance is surging, catering to the predominantly Muslim population with Sharia-compliant products.

Gurugram, INDIA


Gurugram, India, Sept. 27, 2023 (GLOBE NEWSWIRE) -- Story Outline

  • KSA's private consumption expenditure has risen, indicating improved living standards and reduced poverty.
  • Demographic factors influence lending preferences, with under-24 individuals seeking credit for education and ventures, while 25-54 age group seeks loans for homes and cars.
  • Islamic finance has gained popularity, catering to KSA's predominantly Muslim population.
  • Digital banking has reshaped the lending landscape, reducing the need for physical bank branches.

The KSA lending market has shown outstanding growth potential, driven by various catalysts that have fueled the financial landscape in the country.

From consumption expenditure trends to the preferences of different age groups, along with the increasing popularity of Islamic finance and the transformative impact of digital banking, these factors have propelled the lending market forward.

1. KSA Consumption Expenditure Trends

  • KSA’s private consumption expenditure has been following an increasing trend and rose by 26.7% from Oct 2020 to Oct 2022.
  • An increase in private final consumption is usually indicative of a rise in standard of living of people in the society, and a decrease in levels of poverty.
  • Consumption expenditure growth has been rising through the last decade.

As KSA’s personal expenditure is on rise, a need for short term and long-term loans by individuals also increases. Therefore, leading to growth in overall KSA Lending market.

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2. Youth: Credit for knowledge and ventures. Adults: Loans for homes and wheels.

People under the age of 24 taking credit for education and starting businesses while those between 25-54 seeking loans to buy homes and cars

  • KSA has 4% of its citizens under the age of 24 leading to increased demand for credit for education and starting businesses.
  • The population within the age range of 25-54 covers more than half of the population and seeks loans to finance the purchase homes and cars.

These needs of starting a business or buying a new car/house, all of which requires loans to integrate it. Thereby fueling the lending market in KSA.

3. Islamic finance has gained popularity

  • Islamic finance has become increasingly popular in KSA, among the country's large Muslim population (2% of the total population).
  • Islamic finances: Sharia-compliant mortgages, etc. have seen increased demand.
  • To get a Sharia-compliant mortgages one needs -

To qualify for a Sharia mortgage, you'll typically need a deposit of between 10% and 35% of the property's value. That said, it might be possible to find home purchase plans that need as little as a 5% deposit.

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4. Banking in KSA: More Credit, Fewer Branches - Digital Surge Rewrites the Rules

The increase use of digital banking and online services has diminished the need for physical bank branches.

Customers are increasingly using online and mobile banking services for day-to-day transactions like - transferring money to vendors, shopping, checking bank balance etc.

This trend has accelerated during the COVID-19 pandemic, with many customers avoiding in-person banking to reduce the risk of infection.

Conclusion

According to Ken Research, the KSA Lending market is expected to continues to expand in the upcoming years, to reach PHP 67Bn by 2027.

The lending market in KSA is on a promising trajectory, set to reach PHP 67 billion by 2027. This growth is fuelled by key factors like, rising private consumption expenditure signals improved living standards and reduced poverty, driving the need for loans, the diverse lending preferences of different age groups, with the young seeking credit for education and startups, while adults look for loans to buy homes and cars, further boost the market.

Additionally, Islamic finance has gained popularity among the predominantly Muslim population. Lastly, the surge in digital banking has reshaped the lending landscape, reducing the reliance on physical bank branches. These catalysts are reshaping KSA's lending market and offering new opportunities for financial institutions while meeting evolving customer needs.

Customers are increasingly turning away from traditional bank branches in favour of the ease and accessibility provided by digital platforms.

These forces are altering the lending market, opening up new opportunities and posing new problems for Saudi financial institutions.

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Market Taxonomy

KSA Lending Market Segmentation

Retail Loan

SME Loan

Other Loan

By Retail Loans

Home loans

Credit Card loans

Personal loans

Educational loans

BNPL Loans

Auto Loans

SME Loans

Invoice Financing

Supply Chain Financing

Asset Financing

Real Estate Financing

Other Financing

Others Loan

Micro Enterprise Loans

Corporate Loans

For More Insights On Market Intelligence, Refer To The Link Below: –

KSA Lending Market

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