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Consumer lending in Saudi Arabia increases 5%

Bank loans in Saudi Arabia increased 5 percent in the fourth quarter of last year from the previous three months to SAR 242 billion ($64 billion), Arab News reported, citing a Saudi Arabian Monetary Agency report.

Credit card debt in the kingdom fell 3.7 percent to SAR 7.7 billion, the Jeddah-based newspaper reported. The government is trying to expand small and medium-scale enterprise lending as it vies to meet demand for housing and job creation.

Credit concentration risk has been mitigated by high capital requirements, but the small volumes of small- medium-size enterprises and housing finance may have adverse implications for economic growth and the welfare of the population,” the International Monetary Fund said in a report last month.

The kingdom’s economy is projected to grow 6 percent this year down from 6.8 percent in 2011, according to the International Monetary Fund.
Slower GDP growth may reduce credit demand and net interest margins, and possibly reduce fee and trading income,” the Washington-based organization said in the report. A weaker economy would dampen corporate and small business profits and employment, and undermine loan quality,” while “low financial profits would make it more difficult for banks to rebuild capital buffers,” the IMF said.

Inflation in the kingdom is projected to fall to 4.8 percent this year from 5 percent in 2011, according to the IMF.

By Massoud Derhally

Monday, 7 May 2012 11:29 AM