‘SIDF’s role in Development of Industrial Sector in Saudi Arabia’

By Ali Al-Dhalaan8th Rajab,1433

29/05/2012

MAIN POINT TO PRESENTATION

• The Saudi Industrial Development Fund (SIDF) and why it was set up.• SIDF Lending Policy Guidelines.• Analysis of Approved SIDF Industrial Loans.• Advantages of receiving financing through SIDF.• Kafalah Program for SME projects.• Financing Industrial Services projects.• Financing Infra- structure for industrial cities.• Conclusion.

WHY WAS SIDF ESTABLISHED? • SIDF Establishment:

– Royal Decree on 26/02/1394H (1974), commenced operation in 1394 (1974G)

– Development finance institution (affiliated with Ministry of Finance)

– SIDF Capital progressed from SR 500 million to SR 40 billion ($11 Billion).

• SIDF Main Goals and Function:

• Development of Private Industry:

– Medium and Long-term Loans (new projects, expansion, modernization & relocation)

– Detailed analysis of the commercial viability of the project

– Monitoring the performance of projects and the status of the Fund’s loan from initial disbursement to final repayment

– Should an operational project financed by SIDF require technical, marketing, business consultancy, such need-based services are provided free of charge

– Conducting industry related strategic studies

SIDF LENDING POLICY GUIDELINES

• All Industrial Licensed Companies are eligible– Saudi – Joint Venture (between local & foreign companies)– 100% foreign owned projects

• Viable project– Technical– Marketing– Financial

• Maximum 20-years term loan– Repayment schedule designed to match projected cash flow

SIDF LENDING POLICY GUIDLINES

• Up to 75% of Financiable Project Cost– Fixed Assets– Pre-operating– Start-up working capital

• A minimum of 25% Owner's Equity

• Security– Mortgage on the financed fixed assets – Acceptable Pro-rata Personal and Corporate Guarantees from the

shareholders.

• Disbursement Commensurate with Project Implementation– Actual progress supported by documents

ANALYSIS OF APPROVED SIDF INDUSTRIAL LOANS(KSA/ Yanbu Region)

Fiscal Years 1432/1433 (2011G) All Regions

(KSA) Yanbu Region

Cumulative Loan Commitment (as of 31st December 2011)

$25,460 million

$ 2,428 million

Numbers of approved projects 2,371 Projects 72 projects

Cumulative Disbursement $17,228 million $1,643 million

Cumulative Loan Repayment $9,924 million $946 million

Numbers of Fully Repaid Projects 1,308 projects 31 projects

Total number of Loan approved (application) 3,344 90

Total Number of New Industrial Loans 2,371 72

Total Number of Expansion Loans 973 18

ANALYSIS OF APPROVED SIDF INDUSTRIAL LOANS (By Sectors)

All Regions Yanbu Region

Major Sectoral Dist. Of Projects

No. Projects

Loan Amount ($ mn)

No. Projects

Loan Amount ($ mn)

Chemicals 584 10,032 10 153

Building Materials

385 2,804 31 1,308

Engineering Products

684 5,431 14 372

Consumer 642 4,166 3 256

Cement 30 2,609 11 275

Other products 46 418 3 64

Total 2,371 25,460 72 2,428

Advantages Of Receiving Financing Through SIDF Cost of financing: The Fund will apply a front-end evaluation charge (on

approved loans) to cover its costs of studying and evaluating the application, and follow-up costs are billed once every six months during the relationship of the project

The promoters can have an independent opinion whether the investment proposal is fundamentally worth pursuing, as a detailed appraisal of the project's feasibility is conducted

During the pre-screen of the feasibility study the deficiencies, if any, are brought to the attention of the sponsors

Commercial banks and Saudi institutions recognize the value of SIDF's approval of a project's loan

Advantages Of Receiving Financing Through SIDF

If requested, SIDF provides an appraisal of the key managers from amongst the sponsors' candidates

A technical and financial audit is conducted during the project's implementation and operation

Additional loans for project expansion could be done on a fast-track basis

Availability of qualified staff and database enables SIDF to provide valuable advise and consultancy to individual investors

Kafalah program to promote commercial loans to SME projects:

The program:

- The program started on January 2006 and its goal is to provide guarantees of up to 80% of the commercial loans (Banks) to SME projects.

- Maximum amount is up to SR1.6 million or $427,000. Minimum amount is SR 80,000 or $21,300.

- By the end of 2011G Number of guarantees are 3,095. Number of Establishment are 1,991. Amount of granted loans are $818.5 million. Amount of Kafalah (guarantees) $361.4 million.

Financing Industrial Service Projects:

• Natural Gas Distribution projects in Industrial Cities.

• Water Desalination Plants and Water Treatment Plants serving the Industrial Cities.

• Industrial, Chemical and Medical waste treatment.

• Mobile Desalination Plants (Barges).

• Medical and Food Sterilization by using X-rays and electronic rays.

Financing of Infrastructure for Industrial Cities:

• SIDF allocated $270 million to finance Infrastructure in Industrial cities owned by Modon & Private sector.

• The Program goals is to promote private sector companies to invest in development of Industrial Cities.

• Support housing projects at the Industrial cities owned by Modon.

• Support financing Logistics projects related to direct services to industrial cities such as : Transportation, Warehousing, District Cooling, Training Centers and Standards Factories.

CONCLUSION

• SIDF is a financing agency reporting to the Ministry of Finance

• The Fund’s principal objective is to encourage private sector industrial ventures in Saudi Arabia

• The role of SIDF in the development of the private Industrial sector in KSA

• Establishment of Kafalah program to encourage commercial loans for SME.

• Extended SIDF financing to include Industrial Services projects and Infra-structure for Industrial cities.

• Thank you.