New financing regulations likely to cut cost of borrowing, says official

New financing regulations aimed at suspending the licensing of companies selling commodities on installments will likely cut the cost of borrowing, on lower debt-burden ratio in the short-term, Makkah newspaper has reported, citing Zeid Al-Yaeesh, chairman of the General Committee for Financial Companies, an affiliate of SAMA.

"The new system will protect the Kingdom's financial regime in the long-term, regulate fair and responsible finance, reduce unfair transactions and protect consumers," Al-Yaeesh said.

Al-Yaeesh explained that a short-term contradiction between both systems is considered normal, as new regulations typically need time for implementation.

According to a joint statement issued by the Ministry of Commerce and Investment (MoCI), and the Saudi Arabian Monetary Authority (SAMA), new licenses will not be issued for practicing selling by installments. The committee will restrict the financing process to licensed entities, ensuring compliance with SAMA's applied regulations in this regard.

Financing companies can merge into a larger entity and obtain a license for a new company, Al-Yaeesh said, adding that the companies not subject to SAMA regulations may face suspension until they adjust status.